Ziesemer, Thomas () (University of Maastricht, Faculty of Economics) Kriechel, Ben () (University of Maastricht, Research Centre for Education and the Labour Market (ROA))
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Environmental regulation and competitiveness are issues that seem to be at odds. However, the `Porter Hypothesis' states that firms can actually gain in competitiveness if they are subject to stricter environmental regulation. We show in a simple model the basic setting of the problem to apply it then to a Hotelling framework. A non-adoption tax (adoption subsidy) is shown to destroy a non-adoption equilibrium in a closed economy model. We show that taxes not directly targeting the non-adoption problem may fail to have an adoption incentive on the firms. In an open economy model the Porter Hypothesis is shown to hold if (i) non-adoption taxes are higher than adoption costs for one country and lower for the other, and (ii) the returns of second adoption are insufficient to cover the net adoption costs.
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Paper provided by United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology in its series UNU-MERIT Working Paper Series with number
009.
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