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Policy-induced environmental technology and inventive efforts: Is there a crowding out?

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  • Hottenrott, Hanna
  • Rexhäuser, Sascha

Abstract

Significant policy effort is devoted to stimulate the development, adoption and diffusion of environmentally- friendly technology. Sceptics worry about the effects of regulation-induced environmental technology on firms' competitiveness. Since innovation is a crucial productivity driver, a potential crowding out of inventive efforts could increase the cost of mitigating environmental damage. Using matching techniques, we study the short-term effects of regulation-induced environmental technology on non-green innovative activities for a sample of firms in Germany. We find indeed some evidence for a crowding out of the firms' in-house R&D. The estimated treatment effect is larger for firms that are likely to face financing constraints. However, we do not find negative effects on the number of ongoing R&D projects, investments in innovation-related fixed assets or on the outcome of innovation projects. Likewise, for firms with subsidy-backed environmental innovations no crowding out is found.

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  • Hottenrott, Hanna & Rexhäuser, Sascha, 2013. "Policy-induced environmental technology and inventive efforts: Is there a crowding out?," DICE Discussion Papers 128, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:128
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    More about this item

    Keywords

    Environmental Policy; Regulation; R&D; Technological Change; Innovation; Crowding Out;
    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
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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