Andreas Schäfer, University of Bath: "Announcing a Green New Deal: The Role of Policy Signals for Stimulating Entrepreneurship"

Zoom-link:
zoom.us/j/97880482446

Abstract:
Policymakers increasingly recognize the potential of creating local industries and jobs around carbon-neutral technologies. In this paper we discuss whether policymakers can use information related to their energy policies as a signal to stimulate the foundation of new companies. We develop a stylized model in order to inform our empirical hypothesis. The commitment to regulations and laws, for example subsidies, is core to the credibility of environmental policies as well as to protect environmental targets against discretionary actions by myopic governments. Our model comprises strong and weak governments. The latter are unable to commit to their environmental policy. We show that a weak government has no incentive to mimic the environmental policy of a strong government such that the public has clarity about the government’s nature. A strong government on the other hand can make use of policy announcements to spur technological change and green economic activity. In a second step, we explore empirically whether we can identify an impact of policy announcements on entry decision-making of new firms. To do so, we use new data from the Swiss commercial register to analyze the number of new firm registrations related to green energy services. Our study reveals a significant relationship between information on future policies and firm entries indicating that credible policy announcements can indeed spur new industry development.