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The Porter hypothesis and hyperbolic discounting

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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

    as
    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, pages 165-182.
    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.
    3. Matthew Rabin & Ted O'Donoghue, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, pages 103-124.
    4. Ben Kriechel & Thomas Ziesemer, 2009. "The environmental Porter hypothesis: theory, evidence, and a model of timing of adoption," Economics of Innovation and New Technology, Taylor & Francis Journals, pages 267-294.
    5. 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.
    6. Karen Palmer & Wallace E. Oates & Paul R. Portney, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, pages 119-132.
    7. repec:dgr:umamer:2005008 is not listed on IDEAS
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    9. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 443-478.
    10. repec:ner:maastr:urn:nbn:nl:ui:27-19334 is not listed on IDEAS
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    12. Downing, Paul B. & White, Lawrence J., 1986. "Innovation in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 13(1), pages 18-29, March.
    13. 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.
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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, pages 2-22.
    2. Stöver, Jana & Weche, John P., 2015. "Environmental regulation and sustainable competitiveness: Evaluating the role of firm-level green investments in the context of the Porter hypothesis," HWWI Research Papers 170, Hamburg Institute of International Economics (HWWI).
    3. 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.

    More about this item

    Keywords

    Porter hypothesis; abatement tax; R&D; hyperbolic discounting.;

    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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