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Does Trade Liberalization Make the Porter Hypothesis Less Relevant

Author

Listed:
  • Neil Campbell

    (Department of Applied and International Economics, Massey University, New Zealand)

Abstract

The Porter Hypothesis refers to the idea that environmental regulations push firms into developing and adopting new technologies. Controversially, it asserts that the investments in new technology that the firms are pushed into making would be profitable irrespective of whether the regulations had have been put in place. In this paper a simple model is used to illustrate a Porter Hypothesis situation. This framework allows us to establish what conditions are required for a tariff reduction to be an alternative to environmental regulations. That is, we look at a case where, under tariff protection, the firm will only invest in new technology when the environmental regulation is put in place, but in the absence of tariffs, the firm will invest in new technology irrespective of whether the environmental regulation is in place.

Suggested Citation

  • Neil Campbell, 2003. "Does Trade Liberalization Make the Porter Hypothesis Less Relevant," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 2(2), pages 129-140, August.
    • Handle: RePEc:ijb:journl:v:2:y:2003:i:2:p:129-140
    as

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    References listed on IDEAS

    as
    1. Campbell, Neil, 1998. "Can We Believe in Cold Showers?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 13, pages 131-162.
    2. Catherine Liston-Heyes & Anthony Heyes, 1999. "Corporate Lobbying, Regulatory Conduct and the Porter Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(2), pages 209-218, March.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Mai T. T. Tran & Christopher Gan & Baiding Hu, 2019. "Impacts of Trade Liberalisation on CO2 Emissions in Vietnam," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 18(3), pages 265-286, December.
    2. Ambec, Stefan & Barla, Philippe, 2005. "Can Environmental Regulations be Good for Business? an Assessment of the Porter Hypothesis," Cahiers de recherche 0505, Université Laval - Département d'économique.
    3. Earnhart, Dietrich & Germeshausen, Robert & von Graevenitz, Kathrine, 2022. "Effects of information-based regulation on financial outcomes: Evidence from the European Union's public emission registry," ZEW Discussion Papers 22-015, ZEW - Leibniz Centre for European Economic Research.
    4. Rodrigue, Joel & Soumonni, Omolola, 2014. "Deforestation, foreign demand and export dynamics in Indonesia," Journal of International Economics, Elsevier, vol. 93(2), pages 316-338.

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    More about this item

    Keywords

    environmental regulation; innovation offsets; managerial incentives; Porter Hypothesis; trade liberalization;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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