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The Porter hypothesis and hyperbolic discounting

Author

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  • Prabal Roy Chowdhury

    (Indian Statistical Institute, Delhi Center)

Abstract

We examine pollution-reducing R&D by a monopoly firm producing a dirty product. In a dynamic framework with hyperbolic discounting, we establish conditions under which the Porter hypothesis goes through, i.e. environmental regulation increases R&D, thus reducing pollution, as well as increasing firm profits. This is likely to hold whenever R&D costs are at an intermediate level, and the planning horizon of the firms is large.

Suggested Citation

  • Prabal Roy Chowdhury, 2011. "The Porter hypothesis and hyperbolic discounting," Economics Bulletin, AccessEcon, vol. 31(1), pages 167-176.
  • Handle: RePEc:ebl:ecbull:eb-10-00258
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    References listed on IDEAS

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    1. 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.
    2. Indrani Roy chowdhury, 2009. "Incentives for Green R&D in a Dirty Industry under Price Competition," Economics Bulletin, AccessEcon, vol. 29(3), pages 2265-2274.
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    Cited by:

    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. Saidi Magaly Flores Sánchez & Miguel Alejandro Flores Segovia & Luis Carlos Rodríguez López, 2020. "Impact of Public Policies on the Technological Innovation in the Renewable Energy Sector," International Journal of Energy Economics and Policy, Econjournals, vol. 10(2), pages 139-159.
    3. Jana Stoever & John P. Weche, 2018. "Environmental Regulation and Sustainable Competitiveness: Evaluating the Role of Firm-Level Green Investments in the Context of the Porter Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(2), pages 429-455, June.
    4. Indrani Roy Chowdhury & Sandwip K. Das, 2011. "Environmental regulation, green R&D and the Porter hypothesis," Indian Growth and Development Review, Emerald Group Publishing, vol. 4(2), pages 142-152, September.

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    More about this item

    Keywords

    Porter hypothesis; abatement tax; R&D; hyperbolic discounting.;
    All these keywords.

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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