Re-visiting the porter hypothesis
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.
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- Xepapadeas, A. & de Zeeuw, A.J., 1999.
"Environmental policy and competitiveness : The Porter hypothesis and the composition of capital,"
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cfb3ecf9-1a3c-4325-ac1d-b, Tilburg University, School of Economics and Management.
- 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.
- Xepapadeas, A. & de Zeeuw, A.J., 1998. "Environmental Policy and Competitiveness : The Porter Hypothesis and the Composition of Capital," Discussion Paper 1998-38, Tilburg University, Center for Economic Research.
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