Journal
ECONOMICS OF INNOVATION AND NEW TECHNOLOGY
Volume 26, Issue 1-2, Pages 63-77Publisher
ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
DOI: 10.1080/10438599.2016.1202521
Keywords
Porter hypothesis; Green innovation; environmental regulation; complementarity; productivity
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Almost all empirical research that has attempted to assess the validity of the Porter hypothesis (PH) has started from reduced-form models, for example, single-equation models for estimating the contribution of environmental regulation to productivity. This paper follows a structural approach that allows testing what is known in the literature as the 'weak' and the 'strong' version of the PH. Our 'Green Innovation' model includes three types of eco-investments to explain differences in the incidence of two types of eco-innovation, which are allowed to affect labor productivity. We allow for complementarity between the two types of eco-innovations. Using a comprehensive panel of Dutch manufacturing firm-level data we estimate the relative importance of environmental regulations on eco-investment and eco-innovations. The results of our analysis show a strong corroboration of the weak and a nuanced corroboration of the strong version of the PH.
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