Journal article
Pollution abatement with disruptive R&D investment
Resource and energy economics, Vol.66, p.101258
11/2021
Abstract
•R&D investment increases production costs, disrupting first-period output.•We find three equilibrium profiles.•We evaluate how each result is affected by market competition and spillover effects.•We measure welfare levels in each equilibrium profile.
This paper examines a model of investment in abatement where polluting firms produce output while investing in R&D. This investment, however, increases production costs, thus disrupting first-period output. We identify three equilibrium profiles where firms choose to either: (1) invest in R&D alone (thus rationalizing a common modeling assumption in the literature); (2) produce output alone; or (3) engage in both activities. We evaluate how the emergence of each result is affected by the market structure in which firms compete and by the severity of spillover effects. We then measure welfare levels in each equilibrium profile. Overall, we show that firms endogenously choose to focus on R&D only when the market is concentrated and spillover effects are small. In other type of industries, our findings indicate that firms may focus on output production or engage in both activities under relatively large conditions.
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Details
- Title
- Pollution abatement with disruptive R&D investment
- Creators
- John C. Strandholm - University of South Carolina UpstateAna Espinola-Arredondo - Washington State UniversityFelix Munoz-Garcia - Washington State University
- Publication Details
- Resource and energy economics, Vol.66, p.101258
- Academic Unit
- Economic Sciences, School of
- Publisher
- Elsevier B.V
- Identifiers
- 99900971337201842
- Language
- English
- Resource Type
- Journal article