Environmental Efficiency, Emission Trends and Labour Productivity: Trade-Off or Joint Dynamics? Empirical Evidence Using NAMEA Panel Data

The paper provides new empirical evidence on the relationship between environmental efficiency and labour productivity using industry level data. We first provide a critical and extensive discussion around the interconnected issues of environmental efficiency and performance, firm performances and labour productivity, and environmental and non-environmental innovation dynamics. The most recent literature dealing with environmental innovation, environmental regulations and economic performances is taken as reference. We then test a newly adapted EKC hypothesis, by verifying the correlation between the two trends of environmental efficiency (productivity, namely sector emission on added value) and labour productivity (added value on employees) over a dynamic path. We exploit official NAMEA data sources for Italy over 1990-2002 for 29 sectoral branches. The period is crucial since environmental issues and then environmental policies came into the arena, and a restructuring of the economy occurred. It is thus interesting to assess the extent to which capital investments for the economy as a whole are associated with a positive or negative correlation between environmental efficiency of productive branches and labour productivity, often claimed by mainstream theory dealing with innovation in environmental economics. We believe that on the basis of the theoretical and empirical analyses focusing on innovation paths, firm performances and environmental externalities, there are good reasons to expect a positive correlation between environmental and labour productivities, or in alternative terms a negative correlation between mission intensity of production and labour productivity. The tested hypothesis is crucial within the long standing discussion over the potential trade-off or complementarity between environmental and labour productivity, strictly associated with sectoral and national technological innovation paths. The main added value of the paper is the analysis of the aforementioned hypothesis by exploiting a panel data set based on official NAMEA sectoral disaggregated accounting data, providing both cross section heterogeneity and a sufficient time span. We find that for most emissions, if not all, a negative correlation emerges between labour productivity and environmental productivity. Though this trend appears driven by the macro sectors services, manufacturing and industry, this evidence is not homogenous across emissions. In some cases U-shapes arise, mainly for services, and the assessment of Turning Points is crucial. Manufacturing and industry, all in all, seem to have a stronger weight. Overall, then, labour productivity dynamics seem to be complementary to a decreasing emission intensity of productive processes. The extent to which this evidence derives from endogenous market forces, industrial restructuring and/or from policy effects is scope for further research. The relative role of manufacturing and services in explaining this pattern is also to be analysed in future empirical analyses. In addition, the role of capital stocks and trade openness are extensions which may add value to future analyses carried out on the same NAMEA dataset.Decoupling, NAMEA Emissions, Labour Productivity, Sectoral Added Value, Kuznets Curves, Environmental Efficiency

Environmental innovation and industrial dynamics: the contributions of evolutionary economics

The purpose of this article is to discuss the contributions of the evolutionary theory of innovation on the micro and meso dynamics of environmental innovations. We argue that the evolutionary literature on innovation, and more particularly on technological regimes, provides a relevant framework in order to analyse the various determinants of environmental innovations and the double externality problem in an industrial dynamics context. The article starts with an overview of the empirical literature on environmental innovations with a focus on their determinants and specificities. In section 3, we discuss the contributions of the evolutionary literature on technological regimes and argue that it can provide a relevant framework for a sectoral approach of environmental innovations. In section 4, we concentrate on the role of demand side dynamics and highlight the implications of technological competition models on the role of demand conditions in the diffusion of environmental technologies. Finally, section 5 is devoted to the implications of the evolutionary theory of innovation on the question of the transition towards more sustainable technological systems.Environmental innovations, industrial dynamics, evolutionary theory, technological regimes

Sectoral innovation performance in the knowledge intensive services

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Does foreign environmental policy influence domestic innovation? Evidence from the wind industry

This paper examines the relative influence of domestic and foreign renewable energy policies on innovation activity in wind power using patent data from OECD countries from 1994 to 2005. We distinguish between the impact of demand-pull policies (e.g., guaranteed tariffs, investment and production tax credits), as reflected by wind power capacities installed annually, and technology-push policies (government support to R&D). We show that inventors respond to both domestic and foreign new capacities by increasing their innovation effort. However, the effect on innovation of the marginal wind turbine installed at home is 28 times stronger than that of the foreign marginal wind turbine. Unlike demand-pull policies, public R&D expenditures only affect domestic inventors. A simple calculation suggests that the marginal million dollars spent on R&D support generates 0.82 new inventions, whereas the same amount spent on the deployment of wind turbines induces, at best, 0.06 new inventions (0.03 locally and 0.03 abroad)

Enviromental Performance and Regional Innovation Spillovers

The achievement of positive environmental performance at national level could strongly depend on differences in local capabilities of both institutions and the private business sector. Environmental regulation alone is a weak instrument if the institutional and business environment cannot transform regulation strengths into opportunities. In this paper, we use the new environmental accounting matrix for polluting emissions now available for the 20 Italian Regions that covers 24 sectors and combines a shift-share approach with spatial econometric modelling. We provide evidence of the role played by internal innovation, innovation spillovers and regional policies in shaping the geographical distribution of environmental performance achievements.Environmental Performance, Technological Innovation, Regional Spillovers, Polluting Emissions, Italian Regions

Relation entry, exit and productivity: an overview of recent theoretical and empirical literature

This document provides a review of recent theoretical and empirical literature on the relationship between entry, exit and productivity. Decomposition methods show that entry and exit considerably contribute to productivity growth, but are unable to shed any light on the ultimate sources of productivity growth. However, the theories discussed do provide options for effective policy instruments. We argue that productivity or welfare should be the aim of policy and not the number of entrants, the intensity of competition or the amount of innovation expenditures. Taking a welfare approach, we address market failures with respect to entry. The most eminent market failure is market power of dominant incumbents. Lowering institutional entry barriers economy-wide is a promising policy option for further consideration. Whether such a policy measure actually improves social welfare depends also on the extent of other failures. Therefore, an ex ante cost-benefit analysis needs to precede intervention.

LIBERALIZATION AND REGULATION IN THE EU ENERGY MARKET

Competition ensures competitive prices. In this respect, the liberalisation of the EU energy markets is a must. The regulatory framework for the energy markets should be properly designed and implemented by the member states in order to ensure enough competition. This paper aims to analyse the status quo of the EU energy markets in terms of regulatory framework and degree of competition and to recommend improvements of the system in order to balance the issues of competition, energy security and environment protection in the EU energy markets.Energy market, regulation, competition, energy security, climate change

Agenda Disputes and Strategic Venue Preferences: The Doha Crisis and Europe’s Flight to Regionalism

Agenda-setting disputes have become increasingly central to the conduct of multilateral trade negotiations. Introducing some simple concepts from Negotiations Theory, we focus on the dynamic interplay between the Doha Round’s agenda setting and bargaining stages, underlining their implications for the European Union’s evolving win-set in the negotiations. We argue that, by successful enshrining a narrow agenda, key developing countries reduced the set of possible final settlements that were both multilaterally viable and attractive from the point of view of key European interests. In an attempt to avoid imposing concentrated costs on those interests, the European Commission has responded by pursuing its best alternative to a multilateral agreement, shifting negotiating resources away from the multilateral table and towards regional FTA negotiations.Trade Policy-making, Doha Round, EU, sectoral lobbying, trade negotiations

Business Taxation, Corporate Finance and Economic Performance

This survey of recent research in corporate finance discusses how business taxes, subsidies as well as a country's institutional development affect several important decision margins of heterogeneous firms. We argue that innovative firms, as a result of agency problems between insiders and outside investors, are most frequently finance constrained. We discuss how profit taxes reduce investment of constrained firms by their effect on cash-flow, and of unconstrained firms by their effect on the user cost of capital. Moreover, tax reform as well as tax financed R&D subsidies can enhance aggregate investment, innovation and efficiency by implicitly redistributing profits towards constrained firms where capital earns the highest return. We argue that the corporate legal form improves firms' access to external funds. We then explain the firms' choice between venture capital and bank financing and discuss how business taxation can affect venture capital financing on both the extensive and intensive margins. Finally, we review theory and evidence on how corporate finance may shape a country's comparative advantage in innovative industries as well as aggregate labor market performance when part of firms are finance constrained.Financing constraints, innovation, business taxation, subsidies, entrepreneurial choice

Using a Policy Mix for Pollution Control – A Review of Economic Literature

This article provides a review of economic studies analyzing the use of multiple policies – a socalled policy mix – to cope with single pollution problems. To guide and structure the review, an analytical framework is developed and applied. The framework integrates transaction costs into the analysis of pollution problems and policies to overcome them. Moreover, it understands a pollution externality not only as a market failure but more generally as the failure of private governance structures. Based on this insight, two rationales for using a policy mix are identified. First, a policy mix may help to correct for multiple reinforcing failures of private governance structures, such as pollution externalities and technological spillovers. Second, a policy mix can be employed if the implementation of single first-best policies brings about high transaction costs – e.g., when marginal pollution damages are heterogeneous or polluters are unlikely to comply with the policy. For each rationale, the relevant literature is presented. Based on the review, avenues for future research are identified.policy mix, review, environmental policy, pollution control, externality, transaction costs, Coase