Skip to main content Accessibility help
×
Home

The impact of environmental policies on productivity and market competition

  • Javad Sadeghzadeh (a1)

Abstract

While a large body of the literature on environmental policies has focused on the productivity impacts of regulations, less attention has been given to the link between environmental policies and market competition. In this paper, I develop a tractable model that incorporates variable mark-ups to study how a competitive environment is affected by environmental policies in a market with firm heterogeneity and endogenous abatement technology choice. The findings of this study are consistent with the Porter Hypothesis in the sense that environmental regulations motivate abatement technology adoption and enhance productivity and environmental quality. However, the productivity gain is mainly driven by reallocation of resources across firms rather than the induced abatement technological change. Tougher regulations harm the competitive environment by increasing average prices and market concentration. Social welfare also drops because in the absence of strong competition fewer variates are produced in equilibrium.

Copyright

References

Hide All
Aghion, P., Bloom, N., Blundell, R., Griffith, R., and Howitt, P. (2005), ‘Competition and innovation: an inverted-U relationship’, Quarterly Journal of Economics 120(2): 701728.
Alpay, E., Kerkvliet, J., and Buccola, S. (2002), ‘Productivity growth and environmental regulation in Mexican and US food manufacturing’, American Journal of Agricultural Economics 84(4:) 887901.
Arkolakis, C., Demidova, S., Klenow, P.J., and Rodríguez-Clare, A. (2008), ‘Endogenous variety and the gains from trade’, NBER Working Paper No. 13933, National Bureau of Economic Research Cambridge, MA.
Bergin, P.R. and Feenstra, R.C. (2001), ‘Pricing to market, staggered contracts, and real exchange rate persistence’, Journal of International Economics 54: 333359.
Bergin, P.R., Feenstra, R.C., and Gordon, H.H. (2007), ‘Outsourcing and volatility’, NBER Working Paper No. 13144, National Bureau of Economic Research, Cambridge, MA.
Berman, E. and Bui, L.T.M. (2001), ‘Environmental regulation and productivity: evidence from oil refineries’, Review of Economics and Statistics 83(3): 498510.
Dixit, A.K. and Stiglitz, J.E. (1977), ‘Monopolistic competition and optimum product diversity’, American Economic Review 67(3): 297308.
Helpman, E., Melitz, M.J., and Yeaple, S.R. (2004), ‘Export versus FDI with heterogeneous firms’, American Economic Review 94(1): 300316.
Herrendorf, B. and Bai, Y. (2009), ‘What is the relationship between competition and productivity’, 2009 Meeting Paper No. 1142, Society for Economic Dynamics, St Louis, MO.
Holmes, T.J. and Schmitz, J.A. Jr. (2010), ‘Competition and productivity: a review of evidence’, Staff Report No. 439, Federal Reserve Bank of Minneapolis,Minneapolis, MN.
Jaffe, A.B. and Palmer, K. (1997), ‘Environmental regulation and innovation: a panel data study’, Review of Economics and Statistics 79(4): 610619.
Krugman, P. (1980), ‘Scale economies, product differentiation, and the pattern of trade’, American Economic Review 70(5): 950–59.
Levinson, A. and Taylor, M.S. (2003), Trade and the Environment: Theory and Evidence, Princeton, NJ: Princeton University Press.
Li, B.Z. and Shi, S. (2010), ‘Emission tax or standard? The role of productivity dispersion’, 2010 Meeting Paper No. 587, Society for Economics Dynamics, St Louis, MO.
Mansfield, E. (1993), ‘Unauthorized use of intellectual property: effects on investment, technology transfer, and innovation’, in Wallerstein, M.B., Mogee, M.E. and Schoen, R.A. (eds), Global Dimensions of Intellectual Property Rights in Science and Technology, Washington, DC: National Academy Press, pp. 107145.
Melitz, M.J. (2003), ‘The impact of trade on intra-industry reallocations and aggregate industry productivity’, Econometrica 71(6): 16951725.
Melitz, M.J. and Ottaviano, G. (2008), ‘Market size, trade, and productivity’, Review of Economic Studies 75(1): 295316.
Ottaviano, G., Tabuchi, T., and Thisse, J.-F. (2002), ‘Agglomeration and trade revisited’, International Economic Review 43(2): 409436.
Palmer, K., Oates, W.E., and Portney, P.R. (1995), ‘Tightening environmental standards: the benefit-cost or the no-cost paradigm?’, Journal of Economic Perspectives 9(4): 119132.
Porter, M.E. (1991), ‘America's green strategy’, Scientific American 264: 4.
Porter, M.E. and van der Linde, C. (1995), ‘Toward a new conception of the environment-competitiveness relationship’, Journal of Economic Perspectives 9(4): 97118.
Xepapadeas, A. and de Zeeuw, A. (1999), ‘Environmental policy and competitiveness: the Porter hypothesis and the composition of capital’, Journal of Environmental Economics and Management 37(2): 165182.
Yokoo, H.-F. (2009), ‘Heterogeneous Firms, the Porter Hypothesis and Trade’, Kyofo: KSI-Communications.

Related content

Powered by UNSILO

The impact of environmental policies on productivity and market competition

  • Javad Sadeghzadeh (a1)

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed.