Environmental Innovations and productivity: Empirical evidence from Russian regions

The aim of this paper is that of contributing to existing literature on the relationship between environmental innovation and productivity. Generally, environmental innovation (clean) has a lower return than non-en- vironmental one (dirty) in the short run, because of higher compliance costs for regulations. However, the positive effects of policy-induced clean innovations on productivity will be observed in the medium-long run. Since we lack empirical studies on this topic in developing countries, we try to fill this gap for Russia country. Firstly, we investigate whether there is a complementary link or a crowding-out effect between dirty innovation and clean one. Secondly, we identify the extent to which this effect can be sensitive to type of environmental activity. In particular, the paper provides both a theoretical model and an empirical analysis, based upon an unbalanced dataset composed of 85 Russian regions for the period 2010–2015. In order to measure the clean innovation, we take into account both the share of organizations engaged in environmental innovations and share of organizations engaged in reducing CO2 ‘footprint’ (total CO2 production), or engaged in reducing soil, water, noise, or air pollution, or engaged in recycling of waste, water and materials. The empirical results of a panel data model show that the impact of environmental innovations on Russian regions' productivity is positive. This finding could be important in terms of policy implications.