Who invest more in advanced abatement technology : theory and evidence

Jing CAO, Larry D. QIU, Mohan ZHOU

Research output: Journal PublicationsJournal Article (refereed)peer-review

26 Citations (Scopus)


We study firm investment in abatement technology under a heterogeneous‐firm framework. We find that more‐productive firms make more (less) investment in abatement technology if investment and productivity are complements (substitutes). Under linear demand, firms’ abatement investments exhibit an inverted U‐shape with respect to productivity level. This finding is in contrast to results in existing studies. We also find that in response to tightened environmental regulations, more‐productive firms raise their respective investments in abatement technology, whereas less‐productive firms do the opposite. More‐productive firms have lower pollution emission intensity. The key theoretical predictions are confirmed by empirical tests using Chinese data.
Original languageEnglish
Pages (from-to)637-662
Number of pages26
JournalCanadian Journal of Economics
Issue number2
Publication statusPublished - May 2016
Externally publishedYes

Bibliographical note

The authors are very grateful to Hao Li (co-editor), two referees and Ujjayant Chakravorty for their comments and suggestions. The authors benefitted from presenting the paper in the 2012 Biannual Conference of Hong Kong Economic Association (December 2012) and the World Congress of Environmental and Resource Economists (July 2014).

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