Do Financial Constraints Hamper Environmental Innovation Diffusion? An Agent-Based Approach

31 Pages Posted: 18 Apr 2018

See all articles by Paola D'Orazio

Paola D'Orazio

Ruhr Universität Bochum - Macroeconomics

Marco Valente

University of L'Aquila; University of Sussex - Science and Technology Policy Research Unit (SPRU); Ruhr Universität Bochum

Multiple version iconThere are 2 versions of this paper

Date Written: April 16, 2018

Abstract

We develop a model that combines evolutionary economics concepts and methods with environmental economics concerns. The model is populated by consumers, heterogeneous firms, and a financial sector and is used to investigate the dynamic interactions between the demand and supply side, and the role played by binding financial constraints, in the diffusion of environmental innovations. The aim of the model is to understand how environmental goals can be effectively promoted and achieved in presence of a financial sector whose lending attitude is guided by long-termism rather than shorttermism. We show that financial constraints act as a deterring barrier and affect firms’ innovation strategies as well as the evolution of technological paradigms. When financial constraints are less binding, firms do not perceive hindrances to the adoption of eco-innovation and, as a result, the presence of the average green technology in the market increases.

Keywords: Environmental Innovation, Agent-based Computational Economics, Financial Barriers, Green Finance, Short-termism, Deterring barriers, Credit constraints

Suggested Citation

D'Orazio, Paola and Valente, Marco, Do Financial Constraints Hamper Environmental Innovation Diffusion? An Agent-Based Approach (April 16, 2018). SWPS 2018-10. Available at SSRN: https://ssrn.com/abstract=3163535 or http://dx.doi.org/10.2139/ssrn.3163535

Paola D'Orazio (Contact Author)

Ruhr Universität Bochum - Macroeconomics ( email )

Universitaetsstrasse 150
GC/2-162
Bochum, 44801
Germany

HOME PAGE: http://econhoratio.org

Marco Valente

University of L'Aquila ( email )

Piazza del Santuario, 19
Roio Poggio - L'Aquila, 67040
Italy

University of Sussex - Science and Technology Policy Research Unit (SPRU) ( email )

Mantell Building
Falmer
Brighton BN1 9RH UK, Sussex
United Kingdom

Ruhr Universität Bochum ( email )

Faculty of Management and Economics
Chair of International Economics
Bochum, 44780
Germany

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