Clean and productive? Empirical evidence from the German manufacturing industry

In view of the controversial policy debate on “green” growth and corresponding stimulus packages we empirically investigate the production effects of environmental investment as well as of environmental and energy expenditures. Using a panel dataset of German manufacturing sectors our econometric analysis identifies a positive impact of environmental investment on production growth. In contrast, our estimation results cannot support the hypothesis of positive production impacts induced by environmental or energy expenditures. We thus conclude that environmental regulation should in particular stimulate environmental investment in order to be compatible with the pursuit of production growth.

► We empirically investigate the production effects of environmental investment as well as of environmental and energy expenditures of German manufacturing sectors.
► We identify a positive impact of environmental investment on production growth.
► We conclude that environmental regulation should in particular stimulate environmental investment in order to be compatible with the pursuit of production growth.