Re-visiting the porter hypothesis

Indrani Roy Chowdhury () and Sandwip K. Das ()
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Indrani Roy Chowdhury: National Institute of Public Finance and Policy
Sandwip K. Das: School of International Studies, JNU

Working Papers from National Institute of Public Finance and Policy

Abstract: 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.

Keywords: Porter hypothesis; Environmental policy; Research and development (search for similar items in EconPapers)
JEL-codes: H23 L13 (search for similar items in EconPapers)
Pages: 18
Date: 2006-02
Note: Working Paper 38, 2006
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Persistent link: https://EconPapers.repec.org/RePEc:npf:wpaper:06/38

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