R&D Cooperation, Innovation Spillovers and Firm Location in a Model of Environmental Policy
Fondazione Eni Enrico Mattei Working Paper No. 23.98
16 Pages Posted: 24 Sep 1998
Date Written: November 1997
Abstract
In this paper, the reaction of firms to the introduction of environmental charges in a given industry is analyzed. Firms may decide either to relocate their plants abroad or to adopt a new environmental-friendly technology. The latter can be either developed by investing in R&D or obtained by buying a licence. We show that, even if domestic firms share the same initial technology, at the equilibrium they make different choices in response to the same environmental policy. Some firms decide to cooperate in carrying out environmental R&D, other firms re-locate their plants abroad, and a third group decides to innovate through imitation. The size of the three groups can be affected by the government's industrial, trade and environmental policies.
JEL Classification: L51, Q28, Q38
Suggested Citation: Suggested Citation
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