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The strong porter hypothesis in an endogenous growth model with satisficing managers

Author

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  • Dominique Bianco

    (UB - Université de Bourgogne)

  • Evens Salies

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

Few endogenous growth models have focused attention on the strong Porter hypothesis that stricter environmental policies induce innovations, the benefits of which exceed the costs. A key assumption underlying this hypothesis is that policy strictness pushes firms to overcome some obstacles to profit maximization. This paper incorporates pollution and taxation in the model of Aghion and Griffith (2005) of growth which includes satisficing managers and non-drastic innovation. Our theoretical results predict the strong Porter hypothesis. However, assuming drastic innovation in the model, we predict the weak Porter hypothesis. We also consider several extensions, such as a simultaneous competition policy or a command and control policy.

Suggested Citation

  • Dominique Bianco & Evens Salies, 2017. "The strong porter hypothesis in an endogenous growth model with satisficing managers," SciencePo Working papers Main hal-02314755, HAL.
    • Handle: RePEc:hal:spmain:hal-02314755
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-02314755
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    References listed on IDEAS

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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. André, Francisco J., 2015. "Strategic Effects and the Porter Hypothesis," MPRA Paper 62237, University Library of Munich, Germany.
    3. 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.
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    6. 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.
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    11. 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.
    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.
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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, 2022. "Does entrepreneurial behaviour matter for the strong Porter hypothesis?," Economics Bulletin, AccessEcon, vol. 42(2), pages 867-876.
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    4. Hafele, Jakob & Kuhls, Sonia, 2022. "Trade-off or tension: Can carbon be priced without risking economic competitiveness?," ZOE Discussion Papers 9, ZOE. institute for future-fit economies, Bonn.
    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

    Endogeneous growth model;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • 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
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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