Does Trade Liberalization Make the Porter Hypothesis Less Relevant

Neil Campbell
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Neil Campbell: Department of Applied and International Economics, Massey University, New Zealand

International Journal of Business and Economics, 2003, vol. 2, issue 2, 129-140

Abstract: The Porter Hypothesis refers to the idea that environmental regulations push firms into developing and adopting new technologies. Controversially, it asserts that the investments in new technology that the firms are pushed into making would be profitable irrespective of whether the regulations had have been put in place. In this paper a simple model is used to illustrate a Porter Hypothesis situation. This framework allows us to establish what conditions are required for a tariff reduction to be an alternative to environmental regulations. That is, we look at a case where, under tariff protection, the firm will only invest in new technology when the environmental regulation is put in place, but in the absence of tariffs, the firm will invest in new technology irrespective of whether the environmental regulation is in place.

Keywords: environmental regulation; innovation offsets; managerial incentives; Porter Hypothesis; trade liberalization (search for similar items in EconPapers)
JEL-codes: F13 L21 L51 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (4)

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