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The Environmental Porter Hypothesis as a Technology Adoption Problem?

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  • Kriechel, Ben
  • Ziesemer, Thomas

    (MERIT)

Abstract

The Porter Hypothesis postulates that the costs of compliance with environmental standards may be partially or even fully offset by adoption of innovations they trigger. The timing of the adoption aspect of the Porter Hypothesis has not been captured in formal theory so far. We show in this paper how the Porter Hypothesis can be approached using a model of technology adoption. In the Reinganum-Fudenberg-Tirole game of timing, a firm adopts earlier under stricter environmental taxation, and under some circumstances can credibly precommit to early adoption. We show that all times of adoption - preemption, following and joint late adoption - are earlier the higher the non-adoption tax. Under preemption the firm of the country that varies environmental taxes will adopt first with certainty indicating increased competitiveness, but get lower profits than without environ- mental policy. Thus the Porter Hypothesis of increasing overall profits is rejected.

Suggested Citation

  • 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).
    • Handle: RePEc:unm:umamer:2003011
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    References listed on IDEAS

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    Keywords

    economics of technology ;

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • F1 - International Economics - - Trade
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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