Financial Development and Industrial Pollution

Ralph de Haas, A. Popov

Research output: Working paperDiscussion paperOther research output

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Abstract

We study the impact of financial market development on industrial pollution in a large panel of countries and industries over the period 1974-2013. We find a strong positive impact of credit markets, but a strong negative impact of stock markets, on aggregate CO2 emissions per capita. Industry-level analysis shows that stock market development (but not credit market development) is associated with cleaner production processes in technologically "dirty" industries. These industries also produce more green patents as stock markets develop. Moreover, our results suggest that stock markets (credit markets) reallocate investment towards more (less) carbon-efficient sectors. Together,
these findings indicate that the evolution of a country's financial structure helps explain the non-linear relationship between economic development and environmental quality documented in the literature.
Original languageEnglish
Place of PublicationTilburg
PublisherCentER, Center for Economic Research
Number of pages50
Volume2018-024
Publication statusPublished - 16 Jul 2018

Publication series

NameCentER Discussion Paper
Volume2018-024

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Industry
Industrial pollution
Financial development
Credit markets
Stock market
Economic development
Financial structure
Nonlinear relationships
Stock market development
Production process
Market development
Carbon
Environmental quality
Financial market development
Cleaner production
CO2 emissions
Patents

Keywords

  • financial development
  • industrial pollution
  • innovation
  • reallocation

Cite this

de Haas, R., & Popov, A. (2018). Financial Development and Industrial Pollution. (CentER Discussion Paper; Vol. 2018-024). Tilburg: CentER, Center for Economic Research.
de Haas, Ralph ; Popov, A. / Financial Development and Industrial Pollution. Tilburg : CentER, Center for Economic Research, 2018. (CentER Discussion Paper).
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de Haas, R & Popov, A 2018 'Financial Development and Industrial Pollution' CentER Discussion Paper, vol. 2018-024, CentER, Center for Economic Research, Tilburg.

Financial Development and Industrial Pollution. / de Haas, Ralph; Popov, A.

Tilburg : CentER, Center for Economic Research, 2018. (CentER Discussion Paper; Vol. 2018-024).

Research output: Working paperDiscussion paperOther research output

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AU - Popov, A.

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PY - 2018/7/16

Y1 - 2018/7/16

N2 - We study the impact of financial market development on industrial pollution in a large panel of countries and industries over the period 1974-2013. We find a strong positive impact of credit markets, but a strong negative impact of stock markets, on aggregate CO2 emissions per capita. Industry-level analysis shows that stock market development (but not credit market development) is associated with cleaner production processes in technologically "dirty" industries. These industries also produce more green patents as stock markets develop. Moreover, our results suggest that stock markets (credit markets) reallocate investment towards more (less) carbon-efficient sectors. Together,these findings indicate that the evolution of a country's financial structure helps explain the non-linear relationship between economic development and environmental quality documented in the literature.

AB - We study the impact of financial market development on industrial pollution in a large panel of countries and industries over the period 1974-2013. We find a strong positive impact of credit markets, but a strong negative impact of stock markets, on aggregate CO2 emissions per capita. Industry-level analysis shows that stock market development (but not credit market development) is associated with cleaner production processes in technologically "dirty" industries. These industries also produce more green patents as stock markets develop. Moreover, our results suggest that stock markets (credit markets) reallocate investment towards more (less) carbon-efficient sectors. Together,these findings indicate that the evolution of a country's financial structure helps explain the non-linear relationship between economic development and environmental quality documented in the literature.

KW - financial development

KW - industrial pollution

KW - innovation

KW - reallocation

M3 - Discussion paper

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de Haas R, Popov A. Financial Development and Industrial Pollution. Tilburg: CentER, Center for Economic Research. 2018 Jul 16. (CentER Discussion Paper).