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Environmental preferences and technological choices: is market competition clean or dirty?

Aghion, Philippe, Bénabou, Roland, Martin, Ralf and Roulet, Alexandra (2020) Environmental preferences and technological choices: is market competition clean or dirty? CEP Discussion Papers (1684). Centre for Economic Performance, LSE, London, UK.

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This paper investigates the joint effect of consumers' environmental concerns and product-market competition on firms’ decisions whether to innovate “clean” or “dirty”. We first develop a step-bystep innovation model to capture the basic intuition that socially responsible consumers induce firms to escape competition by pursuing greener innovations. To test and quantify the theory, we bring together patent data, survey data on environmental values, and competition measures. Using a panel of 8,562 firms from the automobile sector that patented in 42 countries between 1998 and 2012, we indeed find that greater exposure to environmental attitudes has a significant positive effect on the probability for a firm to innovate in the clean direction, and all the more so the higher the degree of product market competition. Results suggest that the combination of historically realistic increases in prosocial attitudes and product market competition can have the same effect on green innovation as major increase in fuel prices.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2020 The Authors
Divisions: Economics
Centre for Economic Performance
Subjects: H Social Sciences > HD Industries. Land use. Labor
G Geography. Anthropology. Recreation > GE Environmental Sciences
Date Deposited: 14 Jan 2021 15:36
Last Modified: 15 Jan 2021 00:48

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