Does technological advancement really lead to industrial pollution reductions? A spatial-dynamic analysis of industrial firms in Canada

  • Author / Creator
    Sarauer, Ashley
  • The environmental performance of an economic unit is often conditioned on both time (in terms of its history of pollution) and space (in terms of the performance and capital investments for abatement by its neighbors). However, despite large literatures addressing each of these linkages individually, consideration of dynamic and spatial linkages within a unified empirical framework is rare. This study jointly explores the temporal and spatial linkages that determine tradeoffs and complementarities in environmental performance of industrial firms. Our main objective is to examine the role of research and development (R&D) in reducing pollution. While technological change has been purported as a key driver in policy efforts to achieve a clean energy future, the question of `to what extent does technological change directly reduce GHG-emissions?' has received little attention. This omission is striking given the amount of resources that is channeled into R&D at both the national and regional levels throughout the world. To identify the role of technological change on pollution, we pair a panel dataset on carbon dioxide equivalent emissions from Canadian industrial firms for the period 2004-2016 with provincial R&D expenditures over the same period. We control for key observed determinants of firm activity at the industry-sector and provincial levels based on a thorough review of the theoretical and empirical literature. We control for the remaining unobserved firm-level and time-specific influences using two-way firm and time fixed effects, respectively. We estimate our model using a generalized method of moments Spatial Lag Dynamic Panel Data framework which simultaneously accounts for the dynamic panel data problem and the endogenous spatial lag problem. Our results show that technological change measured through R&D expenditures, significantly reduces industrial firm emissions, yet not at a rate that is not large enough to counteract the boost in emissions associated with increased economic activity during periods of economic growth. Further, physical-science based R&D is more effective than social-science based R&D in reducing emissions. In addition, our study finds evidence to suggest that both the dynamic and spatial spillovers of pollution effects have a significant, positive effect on firm-level pollution. Thus, much of the empirical literature on this issue, which focuses either on dynamics or on spatial linkages but not both, suffers from a misspecification error.

  • Subjects / Keywords
  • Graduation date
    Fall 2019
  • Type of Item
  • Degree
    Master of Science
  • DOI
  • License
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