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Re-visiting the Porter Hypothesis


  • Indrani, Roy Chowdhury


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

  • Indrani, Roy Chowdhury, 2006. "Re-visiting the Porter Hypothesis," MPRA Paper 7899, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:7899

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    References listed on IDEAS

    1. 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.
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    Cited by:

    1. Indrani Roy chowdhury, 2009. "Incentives for Green R&D in a Dirty Industry under Price Competition," Economics Bulletin, AccessEcon, vol. 29(3), pages 2265-2274.

    More about this item


    Porter hypothesis; environmental policy; R&D;

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products


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