A Semiparametric Analysis of Green Inventions and Environmental Policies

Massimiliano Mazzanti and Antonio Musolesi ()
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Antonio Musolesi: University of Ferrara; SEEDS, Italy

No 920, SEEDS Working Papers from SEEDS, Sustainability Environmental Economics and Dynamics Studies

Abstract: Innovation is a primary engine of sustainable growth. This paper provides new semiparametric econometric policy evaluation methods and estimates a green knowledge production function for a large, 30-year panel dataset of high-income countries. Because of the high degree of uncertainty surrounding the data-generating process and the likely presence of nonlinearities and latent common factors, the paper considers semiparametric panel specifications that extend the parametric multifactor error model and the random trend model. It also adopts a recently proposed information criterion for smooth model selection to compare these semiparametric models and their parametric counterparts. The results indicate that (1) the semiparametric additive specification with individual time trends is the preferred model, (2) threshold effects and nonlinearities are relevant features of the data that are obscured in parametric specifications, and (3) the effect of environmental policy is significant and clearly heterogeneous when modeled as a nonparametric function of certain knowledge inputs. The evidence shows a relevant nonlinear policy inducement effect occurring through R&D investments.

Keywords: Innovation; knowledge; environmental policy; policy assessment; policy heterogeneity; large panels; cross-sectional dependence; factor models; random trend model; spline functions; model selection. (search for similar items in EconPapers)
Pages: 27 pages
Date: 2020-06, Revised 2020-06
New Economics Papers: this item is included in nep-ecm, nep-eff, nep-env, nep-ino and nep-tid
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Citations: View citations in EconPapers (4)

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http://www.sustainability-seeds.org/papers/RePec/srt/wpaper/0920.pdf First version, 2020 (application/pdf)
http://www.sustainability-seeds.org/papers/RePec/srt/wpaper/0920.pdf Revised version, 2020 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:srt:wpaper:0920

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