Is green innovation an opportunity or a threat to employment? An empirical analysis of three main industrialized areas: The USA, Japan and Europe

Abstract

The effect of environmental innovation on employment is increasingly relevant for sustainable development. However, few studies have examined the role of environmental spillovers based on local innovation at the firm level. We addressed this gap by analysing European, Japanese and American firms, a set of developed economies with different economic structures and subsidies for green innovations. Moreover, we analysed the time frame between 2002 and 2010, which is peculiar for industrial strategies of countries concerning sustainable development, because it included the beginning of the world economic and financial crisis since 2008. The novelty of our work consists in developing a new theoretical framework to discuss the employment effects of innovation at the firm level. Indeed, the proximity between the firms is computed using the original Mahalanobis Environmental Industry Weight matrix (MEIW-matrix), where we used patents distribution for each firm. In particular, we employed econometric methods to handle the heterogeneity and endogenous explanatory variables. The findings show a significant positive impact of environmental spillovers on firms' employment levels. This result sheds some light on the economic effects of policymakers' actions to boost firms' transition toward the use of green technologies.