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Does green corporate investment really crowd out other business investment?

Author

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  • John P. Weche

    (Monopolies Commission and Leuphana University Leuneburg, Germany)

Abstract

Empirical studies on the link between green investment and other business investment at the firm level either focus on innovation specific types of investment or fail to consider the simultaneity of investment decisions. The analysis to be presented here offers a broad focus on different types of environmental protection investment and explicitly considers simultaneity issues, using newly created panel data for German manufacturing firms. Germany is an ideal case for testing the crowding-out hypothesis, due to its high level of environmental regulation and a significant presence of command-and-control style measures, which are especially under debate as a source of crowding-out. The estimation of a behavioral investment model supports a crowdingout of other business investment through environmental protection investment in general as well as its subcategories of add-on measures and investments in renewable energy. However, only the latter subcategory causes a crowding-out at the industry level.

Suggested Citation

  • John P. Weche, 2015. "Does green corporate investment really crowd out other business investment?," Working Paper Series in Economics 350, University of Lüneburg, Institute of Economics.
    • Handle: RePEc:lue:wpaper:350
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    References listed on IDEAS

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    1. Manuel Frondel & Jens Horbach & Klaus Rennings, 2007. "End‐of‐pipe or cleaner production? An empirical comparison of environmental innovation decisions across OECD countries," Business Strategy and the Environment, Wiley Blackwell, vol. 16(8), pages 571-584, December.
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    7. Hanna Hottenrott & Sascha Rexh�user, 2015. "Policy-Induced Environmental Technology and Inventive Efforts: Is There a Crowding Out?," Industry and Innovation, Taylor & Francis Journals, vol. 22(5), pages 375-401, July.
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    Cited by:

    1. Jana Stoever & John P. Weche, 2018. "Environmental Regulation and Sustainable Competitiveness: Evaluating the Role of Firm-Level Green Investments in the Context of the Porter Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(2), pages 429-455, June.

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    More about this item

    Keywords

    green investment; business investment; renewable energy; crowding-out; manufacturing; Germany;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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