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Environmental Regulations and Managerial Myopia

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  • Armin Schmutzler

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Abstract

It has recently been claimed that, contrary totraditional neoclassical theory, suitably chosenenvironmental regulation is often beneficial for theregulated firms because it induces cost-reducinginnovations. I analyze the extent to which thisposition is compatible with microeconomic analysis. Itturns out that even in a framework in whichorganizational inefficiencies might lead tounderinvestment, environmental policy can onlyincrease firm profits if several very specificconditions are met. These conditions concern the typeof policy, the extent of inefficiencies, the costs ofpotential innovation projects and their effect onproductivity and abatement costs. Copyright Kluwer Academic Publishers 2001

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File URL: http://hdl.handle.net/10.1023/A:1011113106055
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 18 (2001)
Issue (Month): 1 (January)
Pages: 87-100

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Handle: RePEc:kap:enreec:v:18:y:2001:i:1:p:87-100

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: environmental regulation; innovation offsets; internal inefficiencies; managerial myopia;

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References

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  1. Aoki, Masahiko, 1990. "Toward an Economic Model of the Japanese Firm," Journal of Economic Literature, American Economic Association, vol. 28(1), pages 1-27, March.
  2. Stein, Jeremy C, 1988. "Takeover Threats and Managerial Myopia," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 61-80, February.
  3. Karen Palmer & Wallace E. Oates & Paul R. Portney, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-132, Fall.
  4. Richard J. Zeckhauser & John Pound, 1990. "Are Large Shareholders Effective Monitors? An Investigation of Share Ownership and Corporate Performance," NBER Chapters, in: Asymmetric Information, Corporate Finance, and Investment, pages 149-180 National Bureau of Economic Research, Inc.
  5. DeCanio, Stephen J., 1993. "Barriers within firms to energy-efficient investments," Energy Policy, Elsevier, vol. 21(9), pages 906-914, September.
  6. Holmstrom, Bengt R. & Tirole, Jean, 1989. "The theory of the firm," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 2, pages 61-133 Elsevier.
  7. Gabel H. Landis & Sinclair-Desgagne Bernard, 1993. "Managerial Incentives and Environmental Compliance," Journal of Environmental Economics and Management, Elsevier, vol. 24(3), pages 229-240, May.
  8. Sinclair-Desgagne, Bernard & Gabel, H. Landis, 1997. "Environmental Auditing in Management Systems and Public Policy," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 331-346, July.
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Citations

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Cited by:
  1. Massimiliano Mazzanti & Roberto Zoboli, 2006. "Examining the Factors Influencing Environmental Innovations," Working Papers 2006.20, Fondazione Eni Enrico Mattei.
  2. Marius Ley & Tobias Stucki & Martin Wörter, 2013. "The Impact of Energy Prices on Green Innovation," KOF Working papers 13-340, KOF Swiss Economic Institute, ETH Zurich.
  3. Ziesemer, Thomas & Kriechel, Ben, 2006. "Taxation and Technology Adoption: A Hotelling Approach," MERIT Working Papers 009, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  4. Kriechel,Ben & Ziesemer,Thomas, 2003. "The Environmental Porter Hypothesis as a Technology Adoption Problem?," Research Memorandum 011, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  5. Ben Kriechel & Thomas Ziesemer, 2009. "The environmental Porter hypothesis: theory, evidence, and a model of timing of adoption," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 18(3), pages 267-294.
  6. Sascha Rexhäuser & Christian Rammer, 2014. "Environmental Innovations and Firm Profitability: Unmasking the Porter Hypothesis," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 57(1), pages 145-167, January.
  7. Andreas Polk, 2002. "Lobbying Activities of Multinational Firms," SOI - Working Papers 0205, Socioeconomic Institute - University of Zurich, revised Jun 2002.

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