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Strategic Effects and the Porter Hypothesis

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  • André, Francisco J.

Abstract

Environmental protection and firms' competitiveness are typically seen as conflicting elements as firms tend to ignore the environmental consequences of their actions and any regulation forcing them to modify their policies can only make them worse-off. Contrarily to this traditional paradigm, the Porter Hypothesis suggests the existence of "low hanging fruits" in the sense that some environmental policies may simultaneously benefit the environment and domestic competitiveness. Our aim is to identify the main theoretical arguments that have been proposed in the literature to support the validity of the Porter Hypothesis and pick the most significant contributions paying special attention to the strategic and international trade aspects. After presenting some general issues and different interpretations of the Porter Hypothesis, we review different theoretical explanations such as the generation of scarcity rents, the use of environmental regulation by national governments as an instrument of strategic trade policy, the existence of externalities in technology adoption, the interaction with output quality competition and the existence of information incompleteness.

Suggested Citation

  • André, Francisco J., 2015. "Strategic Effects and the Porter Hypothesis," MPRA Paper 62237, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:62237
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    File URL: https://mpra.ub.uni-muenchen.de/62237/1/MPRA_paper_62237.pdf
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    Cited by:

    1. Jean Pierre Huiban & Camilla Mastromarco & Antonio Musolesi & Michel Simioni, 2016. "The impact of pollution abatement investments on production technology: new insights from frontier analysis," SEEDS Working Papers 0716, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Jul 2016.
    2. Jean Pierre Huiban & Camilla Mastromarco & Antonio Musolesi & Michel Simioni, 2018. "The impact of pollution abatement investments on production technology: a nonparametric approach," SEEDS Working Papers 0918, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Sep 2018.
    3. Steinar Andresen & Jon Birger Skjærseth & Torbjørg Jevnaker & Jørgen Wettestad, 2016. "The Paris Agreement: Consequences for the EU and Carbon Markets?," Politics and Governance, Cogitatio Press, vol. 4(3), pages 188-196.

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    More about this item

    Keywords

    Porter Hypotesis; Strategic behavior; International trade; Game theory;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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