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Environmental Preferences and Technological Choices : Is Market Competition Clean or Dirty?

Author

Listed:
  • Philippe Aghion

    (Collège de France)

  • Roland Bénabou

    (Princeton University)

  • Ralf Martin

    (Imperial College London)

  • Alexandra Roulet

    (INSEAD)

Abstract

We investigate the effects of consumers' environmental concerns and market competition on firms' decisions to innovate in "clean" technologies. Agents care about their consumption and environmental footprint; firms pursue greener products to soften price competition. Acting as complements, these forces determine R&D, pollution, and welfare. We test the theory using panel data on patents by 8,562 automobile-sector firms in 41 countries, environmental willingness-to pay, and competition. As predicted, exposure to prosocial attitudes fosters clean innovation, all the more so where competition is strong. Plausible increases in both together can spur it as much as a large fuel-price increase.

Suggested Citation

  • Philippe Aghion & Roland Bénabou & Ralf Martin & Alexandra Roulet, 2021. "Environmental Preferences and Technological Choices : Is Market Competition Clean or Dirty?," Working Papers 2021-64, Princeton University. Economics Department..
    • Handle: RePEc:pri:econom:2021-64
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    climate change; Competition; Environment; Innovation; Patents; Social Responsibility;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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