Environmental Policy and Competitiveness: The Porter Hypothesis and the Composition of Capital
AbstractThe 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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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1998-38.
Date of creation: 1998
Date of revision:
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Web page: http://center.uvt.nl
environmental policy; competitiveness; Porter hypothesis; capital;
Other versions of this item:
- Xepapadeas, Anastasios & de Zeeuw, Aart, 1999. "Environmental Policy and Competitiveness: The Porter Hypothesis and the Composition of Capital," Journal of Environmental Economics and Management, Elsevier, vol. 37(2), pages 165-182, March.
- Xepapadeas, A. & Zeeuw, A.J. de, 1999. "Environmental policy and competitiveness: The Porter hypothesis and the composition of capital," Open Access publications from Tilburg University urn:nbn:nl:ui:12-80402, Tilburg University.
- 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; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- F10 - International Economics - - Trade - - - General
This paper has been announced in the following NEP Reports:
- NEP-PUB-1998-06-08 (Public Finance)
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- Revesz, Richard L. & Stavins, Robert N., 2007. "Environmental Law," Handbook of Law and Economics, Elsevier.
- 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.
- Barrett, Scott, 1994. "Strategic environmental policy and intrenational trade," Journal of Public Economics, Elsevier, vol. 54(3), pages 325-338, July.
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- Rauscher, Michael, 1994. "On Ecological Dumping," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 822-40, Supplemen.
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- 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.
- Tobey, James A, 1990. "The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test," Kyklos, Wiley Blackwell, vol. 43(2), pages 191-209.
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