Structural Change and Performance of the German Environmental Sector E-mail
Thursday, April 30, 2009

The paper tries to assess the direction and the main driving forces of the structural change of the German environmental sector from a theoretical and empirical perspective. The empirical analysis is based on data of the establishment panel of the Institute for Employment Research in Nuremberg from 1998 to 2005.

The so-called Environmental Sector produces technologies, products and services that prevent or reduce environmental damages. On the background of growing environmental problems such as climate protection this sector seems to be more and more important. Contrary to that, a theoretical model shows that this hypothesis may not be true for all sections of the environmental sector. End-of-pipe solutions that
operate independently from production processes are mostly driven by environmental regulation so that the demand for these products reacts rather inelastic. This may not be the case for cleaner technologies that are in most cases an integrated part of the production process. Cost-savings are a major motivation to introduce these technologies and products. Unfortunately, the statistical recording of cleaner technologies is very problematic because these technologies or products can not easily be identified separately. This is also the case for our empirical analysis using data from the establishment panel of the Institute for Employment Research. Our analysis of structural change shows a drastic decline of the number of firms and employment in environmental sectors dominated by end-of-pipe but there are positive employment developments and expectations for those cleaner technologies that are captured by our data. This observation is confirmed by an econometric analysis explaining the driving forces of the market shares of firms in the environmental sector.

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