Roland J. M. Benabou presented his recent paper “Environmental Preferences and Technological Choices: Is Market Competition Clean or Dirty?”, co-authored with Philippe Aghion, Ralf Martin, and Alexandra Roulet. From the abstract:
We investigate the effects of consumers’ environmental concerns and market competition on firms’ decisions to innovate in “clean” technologies. Agents care about their consumption and environmental footprint; firms pursue greener products to soften price competition. Acting as complements, these forces determine R&D, pollution, and welfare. We test the theory using panel data on patents by 8,562 automobile-sector firms in 41 countries, environmental willingness-to-pay, and competition. As predicted, exposure to pro social attitudes fosters clean innovation, all the more so where competition is strong. Plausible increases in both together can spur it as much as a large fuel-price increase.