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Environmental Regulations and Managerial Myopia

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  • Armin Schmutzler

    (Socioeconomic Institute, University of Zurich)

Abstract

It has recently been claimed that, contrary to popular perception, suitably chosen environmental regulation is often beneficial for the regulated firms because it induces cost-reducing innovations. I analyze to which extent this position is compatible with microeconomic analysis. It turns out that even in a framework in which organizational inefficiencies might lead to underinvestment, environmental policy can only increase firm profits if several very specific conditions are met. These conditions concern the type of policy, the extent of inefficiencies, the costs of potential innovation projects and their effect on productivity and abatement costs.

Suggested Citation

  • Armin Schmutzler, 1998. "Environmental Regulations and Managerial Myopia," SOI - Working Papers 9903, Socioeconomic Institute - University of Zurich.
    • Handle: RePEc:soz:wpaper:9903
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    References listed on IDEAS

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    7. Karen Palmer & Wallace E. Oates & Paul R. Portney & Karen Palmer & Wallace E. Oates & Paul R. Portney, 2004. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 3, pages 53-66, Edward Elgar Publishing.
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    Citations

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    Cited by:

    1. Yue Zhu & Ziyuan Sun & Shiyu Zhang & Xiaolin Wang, 2021. "Economic Policy Uncertainty, Environmental Regulation, and Green Innovation—An Empirical Study Based on Chinese High-Tech Enterprises," IJERPH, MDPI, vol. 18(18), pages 1-19, September.
    2. Massimiliano Mazzanti & Roberto Zoboli, 2006. "Examining the Factors Influencing Environmental Innovations," Working Papers 2006.20, Fondazione Eni Enrico Mattei.
    3. Kriechel, Ben & Ziesemer, Thomas, 2003. "The Environmental Porter Hypothesis as a Technology Adoption Problem?," Research Memorandum 011, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    4. Ben Kriechel & Thomas Ziesemer, 2009. "The environmental Porter hypothesis: theory, evidence, and a model of timing of adoption," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 18(3), pages 267-294.
    5. Marius Ley, Tobias Stucki, and Martin Woerter, 2016. "The Impact of Energy Prices on Green Innovation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    6. Andreas Polk, 2002. "Lobbying Activities of Multinational Firms," SOI - Working Papers 0205, Socioeconomic Institute - University of Zurich, revised Jun 2002.
    7. Amann, Juergen & Cantore, Nicola & Calí, Massimiliano & Todorov, Valentin & Cheng, Charles Fang Chin, 2021. "Switching it up: The effect of energy price reforms in Oman," World Development, Elsevier, vol. 142(C).
    8. Dongmei Tu & Yao Li & Yong Zeng, 2019. "The Effects Of Environmental Regulation On Exporters’ Exiting Behavior: The Evidence From China," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(02), pages 301-321, March.
    9. Sascha Rexhäuser & Christian Rammer, 2014. "Environmental Innovations and Firm Profitability: Unmasking the Porter Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(1), pages 145-167, January.
    10. Iwata, Hiroki, 2016. "Environmental Regulation and Choice of Innovation in Oligopoly," MPRA Paper 70280, University Library of Munich, Germany.
    11. Ziesemer, Thomas & Kriechel, Ben, 2006. "Taxation and Technology Adoption: A Hotelling Approach," MERIT Working Papers 2006-009, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    12. Yiling Zhu & Tong Zhao, 2022. "Exploring the Role of Environmental Regulation and Technological Innovation in Financial Performance: Evidence from Chinese Heavy-Polluting Industry," Sustainability, MDPI, vol. 14(16), pages 1-18, August.

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    More about this item

    Keywords

    environmental regulation; internal inefficiencies; innovation offsets; managerial myopia;
    All these keywords.

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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