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Entrepreneurship and marginal cost of CO2 emissions in economic development

Hiroki Nakamura and Shunsuke Managi

Economic Analysis and Policy, 2020, vol. 67, issue C, 1-14

Abstract: Previous research separately considers entrepreneurship, environmental quality, or environmental value in the economic development process. This study aims to elucidate the relationship between entrepreneurial activities and environmental load (focusing on CO2) by analyzing global data. Its major contribution is the addition of the entrepreneurship factor in the relationship, not only between entrepreneurship and environment but also among economic development, entrepreneurship, and environment with economic value, by calculating marginal cost. To calculate the marginal cost, the directional distance function is introduced, and the entrepreneurship factor is added to the production function in this calculation. The results show a U-shaped relationship between entrepreneurship and the marginal cost of CO2 emissions in economic development. While an advanced country such as Japan has a median level of marginal cost of CO2, countries such as China, which have low levels of CO2 abatement, have higher rates of entrepreneurial activity. For countries positioned close to the turning point, further promotion of environmental and social entrepreneurship through technological innovation will help achieve greater sustainable progress; this is vital for future sustainable development.

Keywords: Production function; Entrepreneurship; Marginal cost; CO2 emissions; Economic development (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.eap.2020.05.004

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