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Environmental Regulation and Productivity: New Findings on the Porter Hypothesis

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Abstract

This paper provides an empirical analysis of the relationship between the stringency of environmental regulation and total factor productivity (TFP) growth in the Quebec manufacturing sector. This allows us to investigate more fully the Porter hypothesis in three directions. First, the dynamic aspect of the hypothesis is captured through the use of lagged regulation variables. Second, we argue that the hypothesis is more relevant for more polluting sectors. Third, we argue that the hypothesis is more relevant for sectors which are more exposed to international competition. Our empirical results suggest that : 1) the contemporaneous impact of environmental regulation on productivity is negative, 2) the opposite result is observed with lagged regulation variables and 3) this effect is stronger in a sub-group of industries which are more exposed to international competition.

Suggested Citation

  • Paul Lanoie & Michel Patry & Richard Lajeunesse, 2001. "Environmental Regulation and Productivity: New Findings on the Porter Hypothesis," Cahiers de recherche 01-05, HEC Montréal, Institut d'économie appliquée.
  • Handle: RePEc:iea:carech:0105
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    File URL: http://www.hec.ca/iea/cahiers/2001/iea0105_pl.pdf
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    1. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
    2. 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, vol. 9(4), pages 119-132, Fall.
    3. 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.
    4. Gray, Wayne B, 1987. "The Cost of Regulation: OSHA, EPA and the Productivity Slowdown," American Economic Review, American Economic Association, vol. 77(5), pages 998-1006, December.
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    Cited by:

    1. Fabio Iraldo & Francesco Testa & Vlasis Oikonomou & Michela Melis & Marco Frey & Eise Spijker, 2009. "A literature review on the links between environmental regulation and competitiveness," Working Papers 200904, Scuola Superiore Sant'Anna of Pisa, Istituto di Management.
    2. Anabel Zárate-Marco & Jaime Vallés-Giménez, 2015. "Environmental tax and productivity in a decentralized context: new findings on the Porter hypothesis," European Journal of Law and Economics, Springer, vol. 40(2), pages 313-339, October.

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    Keywords

    Porter hypothesis; environmental regulation; productivity.;

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