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The impact of “green regulation” on firm innovation
Mora-Sanguinetti, Juan S. ; Peñasco, Cristina ; Spruk, Rok
Green regulations,” i.e., those aimed at mitigating the effects of climate change and environmental externalities or proposing public policies to improve energy efficiency, have increased ...considerably in number and scope in recent years, now encompassing thousands of individual measures. This article analyzes their effect on innovation using a unique regulatory database covering the period 2008–2022 for Spain. This database identifies regulations at the national and regional levels through textual analysis. Adopting a panel data approach, we assess how different types of environmental regulations—particularly those related to renewable energy—influence firms’ innovation activities in different Spanish regions. Our results indicate that green regulations at the national level have a positive effect on innovation, while regional regulations show mixed or negligible effects. It is particularly noteworthy that the interaction between national and regional regulations can foster innovation, but at a reduced pace compared to regulations established solely at the national level. Given the results concerning regional regulation, we hypothesize that excessive regulatory fragmentation—due to procedures introduced at unequal, or even overlapping, inconsistent, or contradictory rates across jurisdictions—could reduce these benefits. These results contribute to the ongoing debate on the role of environmental regulation in promoting innovation and offer concrete avenues for policymakers to design more coherent and effective regulatory frameworks that reconcile environmental objectives and economic development.
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