The environmental Porter hypothesis: theory, evidence, and a model of timing of adoption
AbstractThe Porter hypothesis postulates that the costs of compliance with environmental standards may be offset by adoption of innovations they trigger. We model this hypothesis using a game of timing of technology adoption. We will show that times of adoption will be earlier if the non-adoption tax is higher. The environmental tax will turn the preemption game with low profits into a game with credible precommitment generating higher profits (pro-Porter). If there is a precommitment game without environmental taxes, the introduction of a tax will lead to lower profits (anti-Porter). An evaluation of the empirical literature indicates that the Porter hypothesis will hold even for profit-maximizing firms under multiple market imperfections such as imperfect competition, X-inefficiency, and agency costs. These are more likely to be present in sectors with large firms. In many case studies that we have evaluated, though, we detected an element of explicit or implicit subsidies for environmentally friendly behaviour, which is in line with Pigovian policies.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Economics of Innovation and New Technology.
Volume (Year): 18 (2009)
Issue (Month): 3 ()
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Other versions of this item:
- Ziesemer, Thomas & Kriechel, Ben, 2007. "The Environmental Porter Hypothesis: Theory, Evidence and a Model of Timing of Adoption," UNU-MERIT Working Paper Series 024, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
- Kriechel, Ben & Ziesemer, Thomas, 2009. "The Environmental Porter Hypothesis: Theory, Evidence and a Model of Timing of Adoption," Open Access publications from Maastricht University urn:nbn:nl:ui:27-19334, Maastricht University.
- Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
- F1 - International Economics - - Trade
- H7 - Public Economics - - State and Local Government; Intergovernmental Relations
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
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