Environmental Regulation and Investment: Evidence from European Industries

Arbeitspapier

This paper contributes to the empirical literature on the relationship between environmental regulation and firm behavior. In particular, we ask whether and how strongly investment decisions of firms respond to stringency in environmental regulation. Environmental stringency is measured as (i) an industry's total current expenditure on environmental protection, and (ii) a country's revenue from environmental taxes. Focusing on European industry level data between 1995 and 2005, we estimate the differential impact of environmental stringency on four types of investment: gross investment in tangible goods, in new buildings, in machinery, and in `productive' investment (investment in tangible goods minus investment in abatement technologies). Both environmental variables enter positively, and their quadratic terms exhibit significantly negative parameter estimates. This, in turn, indicates a positive but diminishing impact of environmental regulation on investment.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers in Economics and Statistics ; No. 2009-04

Classification and Topics

• Classification: Wirtschaft ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
• Subject: Investment ; environmental regulation ; pollution abatement costs ; Investition ; Umweltpolitik ; Folgekosten ; Ökosteuer ; Steueraufkommen ; Europa

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Leiter, Andrea M. ; Parolini, Arno ; Winner, Hannes
• Event: Veröffentlichung
• (who): University of Innsbruck, Department of Public Finance
• (where): Innsbruck
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/73552
• Last update: 10.03.2025, 11:41 AM CET