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Who invests more in advanced abatement technology? Theory and evidence

Jing Cao, Larry Qiu () and Mohan Zhou

Canadian Journal of Economics, 2016, vol. 49, issue 2, 637-662

Abstract: 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.

JEL-codes: Q50 (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:cje:issued:v:49:y:2016:i:2:p:637-662