Green Business Cycles

This paper examines the relationship between green innovation and the business cycle, revealing that while non-green innovation is procyclical, green innovation is countercyclical.

Who

Maximilian Konradt (Imperial College London)

Where

IWH, conference room and via Zoom

Personal details

Maximilian Konradt is a Postdoctoral Fellow at Imperial College Business School. He also serve as an Associate Editor at the Journal of International Economics. His reesearch interests are Macroeconomics, Finance and Climate and Energy.

To join the lecture via Zoom, please register here.

This paper examines the relationship between green innovation and the business cycle, revealing that while non-green innovation is procyclical, green innovation is countercyclical. This pattern holds unconditionally over the business cycle and conditional on economic shocks. Motivated by these findings, we develop a business cycle model with endogenous green and non-green innovation to explain their distinct cyclical behavior. The key mechanism operates through a "Green Is In The Future" channel: green patents are expected to generate higher profits in the future, making green patenting less sensitive to short-term economic fluctuations. In general equilibrium, this channel is reinforced, making green and non-green innovation effective substitutes. We provide direct evidence supporting the model mechanism using data on market-implied values of green and non-green patents.