TY - JOUR

T1 - Environmental Regulation and Sustainable Competitiveness

T2 - Evaluating the Role of Firm-Level Green Investments in the Context of the Porter Hypothesis

AU - Stoever, Jana

AU - Weche, John P.

PY - 2018/6/1

Y1 - 2018/6/1

N2 - We investigate the impact of environmental regulation on firm performance and investment behavior. Exploiting the case of a German water withdrawal regulation that is managed on the state level, we analyze firms’ reactions to an increase in the water tax using a regression-adjusted difference-in-differences approach. We analyze the individual firm’s response to a change in environmental regulation, distinguishing between add-on and integrated environmental investments. This allows us to include innovation diffusion into our analysis, which is likely to be of importance for increasing resource-efficiency. Our results show that the regulation in question shows no sign of affecting firms’ overall competitiveness. The results imply that the predicted negative impact of the regulation on firms’ economic performance that was brought up before the introduction of the tax, does not seem to weigh heavily in this case. Nevertheless, when placed into a sustainable competitiveness context, the regulation considered does not qualify as an appropriate policy tool for fostering green growth.

AB - We investigate the impact of environmental regulation on firm performance and investment behavior. Exploiting the case of a German water withdrawal regulation that is managed on the state level, we analyze firms’ reactions to an increase in the water tax using a regression-adjusted difference-in-differences approach. We analyze the individual firm’s response to a change in environmental regulation, distinguishing between add-on and integrated environmental investments. This allows us to include innovation diffusion into our analysis, which is likely to be of importance for increasing resource-efficiency. Our results show that the regulation in question shows no sign of affecting firms’ overall competitiveness. The results imply that the predicted negative impact of the regulation on firms’ economic performance that was brought up before the introduction of the tax, does not seem to weigh heavily in this case. Nevertheless, when placed into a sustainable competitiveness context, the regulation considered does not qualify as an appropriate policy tool for fostering green growth.

KW - DID

KW - Environmental regulation

KW - Green growth

KW - Green investment

KW - Porter hypothesis

KW - Sustainable competitiveness

KW - Water withdrawal regulation

KW - Economics

UR - http://www.scopus.com/inward/record.url?scp=85016065803&partnerID=8YFLogxK

U2 - 10.1007/s10640-017-0128-5

DO - 10.1007/s10640-017-0128-5

M3 - Journal articles

AN - SCOPUS:85016065803

VL - 70

SP - 429

EP - 455

JO - Environmental and Resource Economics

JF - Environmental and Resource Economics

SN - 0924-6460

IS - 2

ER -