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Re-visiting the porter hypothesis


  • Roy Chowdhury, Indrani

    () (National Institute of Public Finance and Policy)

  • Das, Sandwip K.

    () (School of International Studies, JNU)


We provide a new formulation of the Porter hypothesis that we feel is in the spirit of the hypothesis. Under this formulation we find that the Porter hypothesis need not hold universally, and identify conditions under which it may or may not hold. We first consider the case where the abatement costs associated with a technology is exogenously given. In that case stricter government regulation increases the incentive for adopting the new technology if the old and the new technologies are relatively environmentally friendly to begin with. We then consider the case where the abatement costs associated with a technology is endogenously given. We show that the Porter hypothesis is likely to hold if the new technology is significantly more efficient in production compared to the old technology, or if both the technologies are relatively efficient in production. Whereas if both the technologies are relatively inefficient, then the Porter hypothesis is unlikely to go through. Thus, under the appropriate conditions, the Porter hypothesis may hold even in a static framework.

Suggested Citation

  • Roy Chowdhury, Indrani & Das, Sandwip K., 2006. "Re-visiting the porter hypothesis," Working Papers 06/38, National Institute of Public Finance and Policy.
  • Handle: RePEc:npf:wpaper:06/38
    Note: Working Paper 38, 2006

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    1. repec:ind:iegddp:25 is not listed on IDEAS
    2. 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.
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    More about this item


    Porter hypothesis ; Environmental policy ; Research and development;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets


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