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Environmental compliance costs and innovation activity in UK manufacturing industries

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  • Richard Kneller
  • Edward Manderson

Abstract

We examine the relationship between environmental regulations and innovation, using data from UK manufacturing industry during 2000-2006. We estimate a dynamic model of innovation behaviour, and explicitly account for the likely endogeneity of our measure of the burden of environmental regulations (pollution abatement costs). Our results indicate that environmental R&D and investment in environmental capital are stimulated by greater pollution abatement pressures. However, we do not ?find a positive impact of environmental compliance costs on total R&D or total capital accumulation. New environmental innovations may therefore have a crowding out effect on other potentially more productive investments or avenues for innovation.

Suggested Citation

  • Richard Kneller & Edward Manderson, 2010. "Environmental compliance costs and innovation activity in UK manufacturing industries," Discussion Papers 10/08, University of Nottingham, School of Economics.
    • Handle: RePEc:not:notecp:10/08
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    References listed on IDEAS

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    1. Alonso-Borrego, Cesar & Arellano, Manuel, 1999. "Symmetrically Normalized Instrumental-Variable Estimation Using Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 36-49, January.
    2. Isabelle Piot-Lepetit & Monique Le Moing, 2007. "Productivity and environmental regulation : the effect of the nitrates directive in the French pig sector," Post-Print hal-02375148, HAL.
    3. Isabelle Piot-Lepetit & Monique Moing, 2007. "Productivity and environmental regulation: the effect of the nitrates directive in the French pig sector," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(4), pages 433-446, December.
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    Cited by:

    1. Chakraborty, Pavel & Chatterjee, Chirantan, 2017. "Does environmental regulation indirectly induce upstream innovation? New evidence from India," Research Policy, Elsevier, vol. 46(5), pages 939-955.

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