Abstract
Implementation of environmental regulation might induce R&D activity and the subsequent technological innovation that could reduce the cost of environmental protection. This paper examines whether environmental regulation had the impact on firm's R&D expenditure in Japan. Limited data availability have allowed only a few empirical studies on the topic. This study, using the firm-level data on the capital cost of pollution control as a proxy, investigated the impact of regulation on R&D activity by Pulp and Paper industry in 1970 s. We find significant and positive impact by environmental regulation, suggesting policy induced cost reduction.
