The role of innovation and agglomeration for employment growth in the environmental sector

The environmental sector is supposed to yield a dual benefit: its goods and services are intended to tackle environmental challenges and its establishments should create new jobs. However, it is still unclear in empirical terms whether that really is the case. This paper investigates to what extent employment growth in establishments with green products and services is higher compared to other establishments. Furthermore, the main factors determining labour demand in this field are analysed. We use linked employment and regional data for Germany. The descriptive results show that the environmental sector is characterised by disproportionately high employment growth. The application of a generalised linear mixed model reveals that especially innovation and industry agglomeration foster employment growth in establishments in the environmental sector. Establishments without green products and services show a smaller increase in employment, even if they are also innovative.