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Do Financial Constraints Hamper Environmental Innovation Diffusion? An Agent-Based Approach

Paola D’Orazio () and Marco Valente ()
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Paola D’Orazio: Lehrstuhl für Makroökonomik, Faculty of Economics and Management, Fakultät für Wirtschaftswissenschaft, Ruhr-Universität Bochum, Universitätsstraße 150, 44801 Bochum (Germany).

Authors registered in the RePEc Author Service: Paola D'Orazio

SPRU Working Paper Series from SPRU - Science Policy Research Unit, University of Sussex Business School

Abstract: We develop a model that combines evolutionary economics concepts and methods with environmental economics concerns. The model is populated by consumers, heterogeneous firms, and a financial sector and is used to investigate the dynamic interactions between the demand and supply side, and the role played by binding financial constraints, in the diffusion of environmental innovations. The aim of the model is to understand how environmental goals can be effectively promoted and achieved in presence of a financial sector whose lending attitude is guided by long-termism rather than shorttermism. We show that financial constraints act as a deterring barrier and affect firms’ innovation strategies as well as the evolution of technological paradigms. When financial constraints are less binding, firms do not perceive hindrances to the adoption of eco-innovation and, as a result, the presence of the average green technology in the market increases.

Keywords: Environmental Innovation; Agent-based Computational Economics; Financial Barriers; Green Finance; Short-termism; Deterring barriers; Credit constraints. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp, nep-cse, nep-env, nep-hme, nep-ino and nep-tid
Date: 2018-04
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