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Environmental Regulation, Investment Timing, and Technology Choice
Author(s) -
Gray Wayne B.,
Shadbegian Ronald J.
Publication year - 1998
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/1467-6451.00070
Subject(s) - investment (military) , environmental regulation , open ended investment company , natural resource economics , production (economics) , economics , capital investment , investment strategy , capital (architecture) , return on investment , cleaner production , business , crowding out , industrial organization , microeconomics , engineering , finance , monetary economics , waste management , profit (economics) , archaeology , municipal solid waste , politics , political science , law , history
We test whether environmental regulation affects investment decisions, using Census data for individual paper mills. New mills in states with strict environmental regulations choose cleaner production technologies, with differences in air and water pollution regulation also influencing technology choice. Examining investment allocation across existing plants, we find that abatement and productive investment tend to be scheduled together. However, plants with high abatement investment over the entire period spend significantly less on productive capital. This seems to reflect both environmental investment ‘crowding out’ productive investment within a plant, and firms shifting investment towards plants facing less stringent abatement requirements.