Transboundary Pollution and Absorptive Capacity

Abstract

Abstract:The impact of the investment in absorptive capacity on transboundary pollution is studied by considering two countries each of them regulating a firm.Firms can invest in original research and in absorptive research to lower their pollution intensity. The absorptive research enables a firm to capture part of the original research made by the other one. We show that by means of adequate emission taxes, original and absorptive R&D subsidies, non-cooperating regulators can reach the social optimum. Interestingly, we show that the investment in absorptive research enables non-cooperating regulators to better internalize transboundary pollution. The higher is the ability parameter of absorption, the greater is the proportion of transboundary pollution internalized. Therefore, it is recommended for the international community to make the patent laws more flexible and enabling learning from the research made by others more interesting.

Reducing the emissions gap through endogenous absorptive capacity and regulatory tax

“…Moreover, the investment in AC is higher when the initial technology gap is larger. This result is consistent with the finding of Sawada (2010) and Ben Youssef (2011). However, it contradicts one of the findings of Glass and Saggi (1998) as they claimed that firms spent for imitation only when the technology gap is small.…”

“…In turn, this investment helps to address market distortion related to emission transfers. This result is similar to the deduction of Slim Ben Youssef (2011) where he realized that investment in AC enabled non-cooperating regulators to internalize transboundary pollution.…”

“…Demonstrating that the AC not only encourages firms to increase their R&D efforts, but also in the case where the appropriability level is low, the AC generates disincentive for the competitor. Recently, authors such as Hammerschmidt (2009) and Ben Youssef (2011) have adopted the hypothesis that firms invest in AC to better internalize spillovers. Ben Youssef demonstrated that investment in AC facilitated the internalization of transboundary pollution.…”

Abatement technology innovation modelling with spillover effects under different market structures

“…β is the degree of R&D spillover (0 ≤ β ≤ 1) , β = 0 reflects the case of full R&D appropriability and β = 1 the case of perfect R&D spillover. Further, like the work of [48], we assume that the firm i ′ s abatement technology a i linearly reduces its ratio of emissions to output θ i , that is,…”