ENVIRONMENTAL CONSCIOUSNESS, REPUTATION AND VOLUNTARY ENVIRONMENTAL INVESTMENT

Chia-Ying Liu and Chi-Hsin Wu

Australian Economic Papers, 2009, vol. 48, issue 2, pages 124-137

Abstract: This note attempts to explore the driving force behind firms' voluntary environmental investment and to provide an alternative viewpoint to the traditional notion of environmental investment. We show that, if consumers are environmentally conscious, then firms' environmental investment will enhance their environmentally-based reputation and effectively stimulate consumer demand for the product. Thus, some firms will voluntarily engage in environmental investment. In addition, it is also found that when consumers become more environmentally conscious, in the steady state a high level of environmental investment may be associated with higher output. This result potentially provides an explanation as to why environmental quality may increase with output. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd/University of Adelaide and Flinders University.

Date: 2009

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