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Does Trade Liberalization Make the Porter Hypothesis Less Relevant


  • Neil Campbell

    (Department of Applied and International Economics, Massey University, New Zealand)


The Porter Hypothesis refers to the idea that environmental regulations push firms into developing and adopting new technologies. Controversially, it asserts that the investments in new technology that the firms are pushed into making would be profitable irrespective of whether the regulations had have been put in place. In this paper a simple model is used to illustrate a Porter Hypothesis situation. This framework allows us to establish what conditions are required for a tariff reduction to be an alternative to environmental regulations. That is, we look at a case where, under tariff protection, the firm will only invest in new technology when the environmental regulation is put in place, but in the absence of tariffs, the firm will invest in new technology irrespective of whether the environmental regulation is in place.

Suggested Citation

  • Neil Campbell, 2003. "Does Trade Liberalization Make the Porter Hypothesis Less Relevant," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 2(2), pages 129-140, August.
  • Handle: RePEc:ijb:journl:v:2:y:2003:i:2:p:129-140

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    References listed on IDEAS

    1. Campbell, Neil, 1998. "Can We Believe in Cold Showers?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 13, pages 131-162.
    2. Catherine Liston-Heyes & Anthony Heyes, 1999. "Corporate Lobbying, Regulatory Conduct and the Porter Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(2), pages 209-218, March.
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    Cited by:

    1. Ambec, Stefan & Barla, Philippe, 2005. "Can Environmental Regulations be Good for Business? an Assessment of the Porter Hypothesis," Cahiers de recherche 0505, Université Laval - Département d'économique.
    2. Rodrigue, Joel & Soumonni, Omolola, 2014. "Deforestation, foreign demand and export dynamics in Indonesia," Journal of International Economics, Elsevier, vol. 93(2), pages 316-338.

    More about this item


    environmental regulation; innovation offsets; managerial incentives; Porter Hypothesis; trade liberalization;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm


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