Publication Type
Working Paper
Version
publishedVersion
Publication Date
6-2023
Abstract
Government subsidies are often used to stimulate environment-friendly investment. We find that Chinese firms reduce green investment as the uncertainty of subsidies rises. This effect is identified from weather-driven fluctuations in air pollution that lead to fluctuations in subsidy allocations: Firms in cities where weather-driven subsidy uncertainty is high engage in less green R&D investment, patent applications, and research staff. Industries that are heavy emitters and those focused on environmental technologies are more affected. The results suggest that policy uncertainty may originate not only from political and macroeconomic shocks but from behavioral mechanisms that link policy to salient recent conditions.
Keywords
Economic Policy Uncertainty, R&D, Environment, Irreversible Investment
Discipline
Environmental Sciences | Finance and Financial Management | Sustainability
Research Areas
Finance
Areas of Excellence
Sustainability
Publication
PBCSF-NIFR Research Paper
First Page
1
Last Page
53
Identifier
10.2139/ssrn.4474726
Embargo Period
3-24-2025
Citation
WANG, Mengyu; WURGLER, Jeffrey; and ZHANG, Hong.
Policy uncertainty reduces green investment. (2023). PBCSF-NIFR Research Paper. 1-53.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7688
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2139/ssrn.4474726
