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The strong Porter Hypothesis in an endogenous growth model with satisficing managers

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  • Dominique Bianco

    (Université de Bologne, LEDI (CNRS))

  • Evens Salies

    (OFCE-SciencesPo)

Abstract

Few endogenous growth models have focused attention on the strong Porter hypothesis, that stricter environmental policies induce innovations, the benefits ofwhich exceed the costs. A key assumption in this hypothesis is that policy strictness pushes rms to overcome some obstacles to profit maximization. We model this hypothesis by incorporating pollution and taxation in the Aghion and Grifith (2005) analysis of growth with satisficing managers. Our theoretical results predict the strong Porter hypothesis. Moreover, they suggest that the stringency of environmental policy should adjust to changes in the level of potential competition in the intermediate inputs sector

Suggested Citation

  • Dominique Bianco & Evens Salies, 2016. "The strong Porter Hypothesis in an endogenous growth model with satisficing managers," Documents de Travail de l'OFCE 2016-01, Observatoire Francais des Conjonctures Economiques (OFCE).
    • Handle: RePEc:fce:doctra:1601
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    1. Stefan Ambec & Mark A. Cohen & Stewart Elgie & Paul Lanoie, 2013. "The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(1), pages 2-22, January.
    2. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    3. Philippe Aghion & Mathias Dewatripont & Patrick Rey, 1999. "Competition, Financial Discipline and Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(4), pages 825-852.
    4. André, Francisco J., 2015. "Strategic Effects and the Porter Hypothesis," MPRA Paper 62237, University Library of Munich, Germany.
    5. Feichtinger, Gustav & Hartl, Richard F. & Kort, Peter M. & Veliov, Vladimir M., 2005. "Environmental policy, the porter hypothesis and the composition of capital: Effects of learning and technological progress," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 434-446, September.
    6. Ricci, Francesco, 2007. "Channels of transmission of environmental policy to economic growth: A survey of the theory," Ecological Economics, Elsevier, vol. 60(4), pages 688-699, February.
    7. 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.
    8. Ambec, Stefan & Barla, Philippe, 2007. "Survol des fondements théoriques de l’hypothèse de Porter," L'Actualité Economique, Société Canadienne de Science Economique, vol. 83(3), pages 399-413, septembre.
    9. Aghion, Ph. & Dewatripont, M. & Rey, P., 1997. "Corporate governance, competition policy and industrial policy," European Economic Review, Elsevier, vol. 41(3-5), pages 797-805, April.
    10. David Scharfstein, 1988. "Product-Market Competition and Managerial Slack," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 147-155, Spring.
    11. Adam B. Jaffe & Karen Palmer, 1997. "Environmental Regulation And Innovation: A Panel Data Study," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 610-619, November.
    12. Francesco Ricci, 2007. "Environmental policy and growth when inputs are differentiated in pollution intensity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(3), pages 285-310, November.
    13. Hart, Rob, 2004. "Growth, environment and innovation--a model with production vintages and environmentally oriented research," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1078-1098, November.
    14. Mohr, Robert D., 2002. "Technical Change, External Economies, and the Porter Hypothesis," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 158-168, January.
    15. Minoru Nakada, 2004. "Does Environmental Policy Necessarily Discourage Growth?," Journal of Economics, Springer, vol. 81(3), pages 249-275, March.
    16. Philippe Aghion & Christopher Harris & Peter Howitt & John Vickers, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(3), pages 467-492.
    17. Adam Jaffe & Richard Newell & Robert Stavins, 2002. "Environmental Policy and Technological Change," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 22(1), pages 41-70, June.
    18. Michael E. Porter & Claas van der Linde, 1995. "Toward a New Conception of the Environment-Competitiveness Relationship," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 97-118, Fall.
    19. Robert D. Mohr & Shrawantee Saha, 2008. "Distribution of Environmental Costs and Benefits, Additional Distortions, and the Porter Hypothesis," Land Economics, University of Wisconsin Press, vol. 84(4), pages 689-700.
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    Cited by:

    1. Shuai Guan & Jinquan Liu & Yongfu Liu & Mingze Du, 2022. "The Nonlinear Influence of Environmental Regulation on the Transformation and Upgrading of Industrial Structure," IJERPH, MDPI, vol. 19(14), pages 1-16, July.
    2. Dominique Bianco, 2017. "Environmental Policy in an Endogenous Growth Model with Expanding Variety," Revue d'économie politique, Dalloz, vol. 127(6), pages 1013-1028.
    3. Bianco, Dominique, 2020. "Does Entrepreneurial Behaviour Matter for the Strong Porter Hypothesis," MPRA Paper 100116, University Library of Munich, Germany.
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    5. Afonso, Oscar, 2023. "Fiscal and monetary effects on environmental quality, growth, and welfare," Research in Economics, Elsevier, vol. 77(1), pages 202-219.

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    More about this item

    Keywords

    Strong Porter Hypothesis; Environmental Policy; Endogenous Growth;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth

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