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Abstract

The objective of this paper is to evaluate the effectiveness of different policies in facilitating the diffusion of green innovations through trade. Focusing on developing countries, this paper develop analyses the effectiveness of policies such as information, subsidies, and banning the use of the incumbent technology in encouraging the use of a clean technology. The empirical model uses a novel dataset of a sample of 72 low and middle-income countries, spanning the period 1993- 2013 to evaluate the effectiveness of these policies, and analyse the determinants of policy choice. Results suggest that domestic policies pay a pivotal role in facilitating the transfer of CFL, especially subsidies; however, simultaneous implementation of policies need not necessarily be effective. Moreover, countries learn from the experiences of other countries in deciding whether to implement a particular policy. Results also suggest a role for trade policy instruments, such as trade agreements with top exporters, to facilitate clean technology diffusion.

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