Environmental Policy and Competitiveness: The Porter Hypothesis and the Composition of Capital

Anastasios Xepapadeas () and A.J. de Zeeuw
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A.J. de Zeeuw: Tilburg University, Center for Economic Research

No 1998-38, Discussion Paper from Tilburg University, Center for Economic Research

Abstract: The Porter hypothesis suggests a double dividend in the sense that environmental policy improves both environment and competitiveness. The suggestion received strong criticism from economists mainly driven by the idea that if opportunities for higher competitiveness exist firms do not have to be triggered by an extra cost. Therefore, the trade-off for the government between environmental and other targets remains. In this paper a model is developed which confirms the last point but which also draws the attention to some general mechanisms that relax the trade-off considerably. Downsizing and especially modernization of firms subject to environmental policy will increase average productivity and will have positive effects on the marginal decrease of profits and environmental damage. Concluding, a double dividend can generally not be expected but the trade-off is not so grim as is often suggested.

JEL-codes: Q28 O31 F10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pub
Date: 1998
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Related works:
Working Paper: Environmental policy and competitiveness: The Porter hypothesis and the composition of capital (1999)
Journal Article: Environmental Policy and Competitiveness: The Porter Hypothesis and the Composition of Capital (1999)
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Persistent link: http://EconPapers.repec.org/RePEc:dgr:kubcen:199838

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