Environmental Preferences and Technological Choices: Is Market Competition Clean or Dirty?
American Economic Review: Insights
vol. 5,
no. 1, March 2023
(pp. 1-20)
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 7,060 automobile sector firms in 25 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.Citation
Aghion, Philippe, Roland Bénabou, Ralf Martin, and Alexandra Roulet. 2023. "Environmental Preferences and Technological Choices: Is Market Competition Clean or Dirty?" American Economic Review: Insights, 5 (1): 1-20. DOI: 10.1257/aeri.20210014Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- L62 Automobiles; Other Transportation Equipment; Related Parts and Equipment
- O31 Innovation and Invention: Processes and Incentives
- O34 Intellectual Property and Intellectual Capital
- Q52 Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
- Q53 Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
- Q54 Climate; Natural Disasters and Their Management; Global Warming