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Who invests more in advanced abatement technology? Theory and evidence
Author(s) -
Cao Jing,
Qiu Larry D.,
Zhou Mohan
Publication year - 2016
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12208
Subject(s) - productivity , investment (military) , industrial organization , economics , natural resource economics , porter hypothesis , empirical evidence , clean technology , business , macroeconomics , ecology , politics , political science , law , philosophy , epistemology , biology
We study firm investment in abatement technology under a heterogeneous‐firm framework. We find that more‐productive firms make more (less) investment in abatement technology if investment and productivity are complements (substitutes). Under linear demand, firms’ abatement investments exhibit an inverted U‐shape with respect to productivity level. This finding is in contrast to results in existing studies. We also find that in response to tightened environmental regulations, more‐productive firms raise their respective investments in abatement technology, whereas less‐productive firms do the opposite. More‐productive firms have lower pollution emission intensity. The key theoretical predictions are confirmed by empirical tests using Chinese data.