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Environmental policy and competitiveness : the Porter hypothesis and the composition of capital

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Author Info
Xepapadeas, A.
Zeeuw, A. de (Tilburg University, Center for Economic Research)

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Abstract

The Porter hypothesis suggests a double dividend in the sense that environmental policy improves both environment and competitiveness. The suggestion received strong criticism from economists mainly driven by the idea that if opportunities for higher competitiveness exist firms do not have to be triggered by an extra cost. Therefore, the trade-off for the government between environmental and other targets remains. In this paper a model is developed which confirms the last point but which also draws the attention to some general mechanisms that relax the trade-off considerably. Downsizing and especially modernization of firms subject to environmental policy will increase average productivity and will have positive effects on the marginal decrease of profits and environmental damage. Concluding, a double dividend can generally not be expected but the trade-off is not so grim as is often suggested.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 38.

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Date of creation: 1998
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Handle: RePEc:dgr:kubcen:199838

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Find related papers by JEL classification:
Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
F10 - International Economics - - Trade - - - General

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  1. Rauscher, Michael, 1994. "On Ecological Dumping," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 822-40, Supplemen. [Downloadable!] (restricted)
  2. Palmer, Karen & Oates, Wallace E & Portney, Paul R, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-32, Fall. [Downloadable!] (restricted)
  3. Tobey, James A, 1990. "The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test," Kyklos, Blackwell Publishing, vol. 43(2), pages 191-209.
  4. Adam B. Jaffe et al., 1995. "Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 132-163, March. [Downloadable!] (restricted)
  5. Simpson, R. David & Bradford, Robert III, 1996. "Taxing Variable Cost: Environmental Regulation as Industrial Policy," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 282-300, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. David Popp, 2005. "Uncertain R&D and the Porter Hypothesis," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
  2. Emilio Galdeano Gómez, 2002. "Competitividad de las cooperativas hortofrutícolas: análisis del impacto económico de las acciones de calidad y medioambientales en las OPFH andaluzas," CIRIEC-España, revista de economía pública, social y cooperativa, CIRIEC-España, issue 41, pages 53-83, August. [Downloadable!]
  3. Brännlund, Runar & Lundgren, Tommy, 2008. "Environmental policy and profitability - Evidence from Swedish industry," UmeÃ¥ Economic Studies 750, Umeå University, Department of Economics. [Downloadable!]
  4. Thomas Ziesemer, 2007. "The Porter Hypothesis Revisited - An Overview on Empirical and Theoretical Evidence," Diskussionsreihe "Global Business Management" 1, University of Augsburg, competence center for global business management. [Downloadable!]
  5. Paul Lanoie & Daniel Llerena, 2009. "Des billets verts pour des enterprises agricoles vertes," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 90(2), pages 155-184. [Downloadable!]
  6. Marklund, Per-Olov, 2004. "Essays on Productive Efficiency, Shadow Prices, and Human Capital. PhD Thesis," UmeÃ¥ Economic Studies 621, Umeå University, Department of Economics. [Downloadable!]
  7. Feichtinger, G. & Hartl, R.F. & Kort, P.M., 2001. "Dynamic investment behavior taking into account ageing of the capital good," Discussion Paper 13, Tilburg University, Center for Economic Research. [Downloadable!]
  8. Raouf Boucekkine & Natali Hritonenko & Yuri Yatsenko, . "Optimal Firm Behavior under Environmental Constraints," Working Papers 2008_11, Department of Economics, University of Glasgow. [Downloadable!]
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  9. Vries, Frans P. de & Withagen, Cees, 2005. "Innovation and environmental stringency: the case of sulfur dioxide abatement," Discussion Paper 18, Tilburg University, Center for Economic Research. [Downloadable!]
  10. Marklund, Per-Olov, 2003. "Environmental Regulation and Firm Efficiency: Studying the Porter Hypothesis using a Directional Output Distance Function," UmeÃ¥ Economic Studies 619, Umeå University, Department of Economics. [Downloadable!]
  11. Roediger-Schluga, Thomas, 2002. "Some micro-evidence on the "Porter Hypothesis" from Austrian VOC emission standards," ERSA conference papers ersa02p290, European Regional Science Association. [Downloadable!]
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  12. Kort, P.M. & Feichtinger, G. & Hartl, R.F. & Veliov, V.M., 2003. "Environmental policy, the porter hypothesis and the composition of capital: effects of learining and techonological progress," Discussion Paper 61, Tilburg University, Center for Economic Research. [Downloadable!]
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  13. F. Ricci, 2004. "Environmental Policy and Growth when Inputs are Differentiated in Pollution Intensity," THEMA Working Papers 2004-23, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise. [Downloadable!]
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  14. Roy Chowdhury, Indrani & Das, Sandwip K., 2006. "Re-visiting the porter hypothesis," Working Papers 06/38, National Institute of Public Finance and Policy. [Downloadable!]
  15. Ambec, Stefan & Barla, Philippe, 2005. "Can Environmental Regulations be Good for Business? an Assessment of the Porter Hypothesis," Cahiers de recherche 0505, GREEN. [Downloadable!]
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  16. William Konchak & Unai Pascual, 2005. "Converging Paradigms for a Co-evolutionary Environmental Limit Discourse," Environmental Economy and Policy Research Working Papers 14.2005, University of Cambridge, Department of Land Economics, revised 2005. [Downloadable!]
  17. ThŽophile, AZOMAHOU & Raouf, BOUCEKKINE & Phu, NUYEN VAN, 2003. "Energy consumption, technological progress and economic policy," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003025, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  18. Francisco J. André & Paula González & Nicolás Porteiro, 2007. "Strategic Quality Competition and the Porter Hypothesis," Working Papers 07.03, Universidad Pablo de Olavide, Department of Economics. [Downloadable!]
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  19. Théophile T. Azomahou & Raouf Boucekkine & Phu Nguyen-Vanc, . "Promoting Clean Technologies: The Energy Market Structure Crucially Matters," Working Papers 2008_13, Department of Economics, University of Glasgow. [Downloadable!]
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  20. Brännlund, Runar, 2008. "Productivity and environmental regulations - A long run analysis of the Swedish industry," UmeÃ¥ Economic Studies 728, Umeå University, Department of Economics. [Downloadable!]
  21. Indrani, Roy Chowdhury, 2006. "Re-visiting the Porter Hypothesis," MPRA Paper 7899, University Library of Munich, Germany. [Downloadable!]
  22. Martin Klein & Jaqueline Rothfels, . "Can Environmental Regulation of X-Ineffecient Firms Create a -Double Dividend-?," IWH Discussion Papers 103, Halle Institute for Economic Research. [Downloadable!]
  23. 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. [Downloadable!]
    Other versions:
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