Green Investment and Productivity Dynamics

This paper reviews existing definitions and measurement efforts to capture the extent of green technological investment, and it provides a measurable definition of green capital asset for a sample of 18 OECD countries from 2004 to 2020. A main goal of this paper is to assess the contribution of green technological capital to productivity growth also taking into account the effects of tightening environmental regulations. The econometric results suggest that: (1) an increase in green technological capital stock generates medium-term productivity gains; (2) stricter environmental regulations boost, rather than hinder, productivity growth. Furthermore, the empirical findings corroborate previous evidence that more stringent nonmarket policies, such as emission limits, can stimulate innovation, thereby contributing to positive productivity returns. The paper provides also some policy insights highlighting the critical role of green technological investment in promoting sustainable growth while mitigating climate change.