technical change external economies and the porter hypothesis abstract michael porter introduces the idea that environmental regulations may benefit affected firms this paper derives results consistent with porter s hypothesis by employing a general equilibrium framework with a large number of agents external economies of scale in production and discrete changes in technology the model shows that endogenous technical change makes porter s hypothesis feasible however a policy that produces results consistent with porter s hypothesis is not necessarily optimal

the specification and estimation of interrelated factor demands under uncertainty abstract this paper studies a model of the firm s interrelated demands for the factors of production incorporating exogenous variables with uncertain future values multiple quasi fixed factors depreciation in use and non symmetric internal costs of adjustment the inputs considered are production labor non production workers capital inventories of non finished goods and capacity and non production worker utilization rates a simultaneous system of factor demand equations with constraints is estimated and using u s manufacturing data the model is shown to be tractable under certain assumptions the results are encouraging given the complexity and the nature of the model

how do budget deficits and economic growth affect reelection prospects evidence from a large panel of countries conventional wisdom is that good economic conditions and expansionary fiscal policy help incumbents get reelected but this has not been tested in a large cross section of countries we test these arguments in a sample of 74 countries over the period 1960 2003 we find no evidence that deficits help reelection in any group of countries developed and less developed new and old democracies countries with different government or electoral systems and countries with different levels of democracy in developed countries and in old democracies election year deficits actually reduce the probability that a leader is reelected with similar although smaller negative electoral effects of deficits in the earlier years of an incumbent s term in office higher growth rates of real gdp per capita raise the probability of reelection only in the less developed countries and in new democracies but voters are affected by growth over the leader s term in office rather than in the election year itself and apparently only by growth not attributed to global growth low inflation is rewarded by voters only in the developed countries the effects we find are not only statistically significant but also quite substantial quantitatively we also suggest how the absence of a positive electoral effect of deficits can be consistent with the political deficit cycle found in new democracies

taxing variable cost environmental regulation as industrial policy abstract conventional wisdom has it that a country that enacts strict environmental regulations will place its firms at a competitive disadvantage this view has been challenged recently some commentators argue that stricter regulation will enhance domestic competitiveness strict regulations induce innovation we evaluate this argument in a strategic trade model in very special cases a strengthening of regulation may result in a shift of profits from foreign to domestic firms this is not a general result however environmental regulation should of course be imposed to control externalities but it is unlikely that it will serve to generate industrial advantage

environmental quality competition and eco labeling abstract a three stage game of investment environmental quality provision and price competition is developed to study the impact of green technology investment eco labeling in a duopoly model of vertical product differentiation the firms incentives to invest in green technologies depend on their relative cost structure when firms are identical with respect to fixed costs both firms will always invest but if one firm is more efficient in investing then the other firm may or may not invest depending on the level of unit cost of investment quality competition will be tighter when the low quality firm is more efficient and looser when the high quality firm is more efficient in investing socially optimal investment for both firms is always positive but lower than in the duopoly solution in the absence of environmental externalities the quality dispersion chosen by profit maximizing firms may be too high or too low while environmental externalities increase the possibility low quality dispersion that is too low within the market solution finally and importantly ecolabeling can be used as a means of reducing excessive investment and increasing environmental quality that is too low

on the instability of the r d portfolio in a dynamic monopoly or one cannot get two eggs in one basket abstract firms innovation portfolios include several dimensions ranging from organizational aspects to cost reduction and product characteristics all of these efforts take place during the product life cycle and interact with each other in determining the spectrum of features of the product and its performance on the market this paper contributes to the related theoretical debate focussing on the possibility of having superior product quality levels at lower marginal production cost over time to deal with this issue we investigate the optimal r d portfolio of a single product monopolist investing in cost reducing activities accompanied by efforts improving the quality of its product over an infinite time horizon it turns out that the firm s relative incentives along the two directions are conditional upon market affluence measured by consumers willingness to pay for quality and r d efforts are complements in the neighbourhood of the steady state equilibrium however the dynamics of the two r d controls depend on both quality and marginal cost at every instant consequently as the stability analysis reveals the steady state equilibrium is indeed unstable due to the dynamics of marginal cost thereby implying that one should not expect the firm to supply an increasing quality level at a decreasing production cost hence the dynamic interplay between r d controls and the resulting instability affecting production costs also imply that one may not expect to observe product quality to increase and market price to decrease over the product life cycle

political business cycles 40 years after nordhaus the aim of this article is to survey the huge literature that has emerged in the last four decades following nordhaus s rev econ stud 42 2 169 190 1975 publication on political business cycles pbcs i first propose some developments in history of thought to examine the context in which this ground breaking contribution saw the light of the day i also present a simplified version of nordhaus s model to highlight his key results i detail some early critiques of this model and the fields of investigations to which they gave birth i then focus on the institutional context and examine its influence on pbcs the actual research agenda finally i derive some paths for future research

a positive theory of environmental quality regulation this paper demonstrates that environmental quality regulation may enhance producer wealth while simultaneously reducing an externality problem by restricting access to common property regulation not only corrects a resource misallocation but it creates a scarcity rent as well in the recent history of environmental quality the common access problem has been addressed by federal and state agencies through a standards based approach rather than through the enforcement of tradable property rights as a consequence rents from the right to use these assets have accrued to producers the data are convincing that there is a strong interplay between producers consumers and the victims of pollution each party has some influence on the outcome and one sided analysis neglects many important aspects of regulation environmental quality regulation is complicated but many of the observed perplexities are consistent with a rent seeking self interest theory of government 46 references 1 figure 7 tables

optimal tax policy under environmental quality competition this paper studies the socially optimal emission and commodity tax policy when consumers are willing to pay a price premium for environmentally friendlier variants of a commodity vertically differentiated in environmental quality the first best levels of quality can be obtained by a combination of a uniform ad valorem tax and an emission tax or a subsidy for buying green products the first best emission tax is higher than the social valuation of the positive externality associated with average environmental quality regardless of environmentally conscious consumers if only one instrument is available the second best emission tax is equal to the social valuation of the positive externality associated with average environmental quality a uniform ad valorem tax increases welfare only if the social valuation of the positive externality associated with average environmental quality is low enough

the switching effect of environmental taxation within bertrand differentiated duopoly we investigate second best optimal taxation of the polluting variety of a product in a bertrand duopoly with differentiated varieties the analysis provides novel insight on a useful social function of environmental regulation besides internalizing the environmental externality the taxation of the polluting variety improves the matching of consumers and product varieties and so creates a socially desirable business switching between the differentiated varieties

the modern history of exchange rate arrangements a reinterpretation we develop a novel system of reclassifying historical exchange rate regimes one key difference between our study and previous classifications is that we employ monthly data on market determined parallel exchange rates going back to 1946 for 153 countries our approach differs from the imf official classification which we show to be only a little better than random it also differs radically from all previous attempts at historical reclassification our classification points to a rethinking of economic performance under alternative exchange rate regimes indeed the breakup of bretton woods had less impact on exchange rate regimes than is popularly believed

on the vote purchasing behavior of incumbent governments a couple of months before the swedish election in 1998 the incumbent government distributed 2 3 billion sek to 42 out of 115 applying municipalities this was the first wave of a four year long grant program intended to support local investment programs aimed at an ecological sustainable development this temporary grant program differs from traditional intergovernmental grants in several aspects most importantly in the sovereign decision making power given to the incumbent central government in this paper we investigate whether there were any tactical motives behind the distribution of these grants we find support for the hypothesis that the incumbent government used the grant program under study in order to win votes in particular we find strong support for the lindbeck weibull dixit londregan model in which parties distribute transfers to regions where there are many swing voters this result is statistically as well as economically significant we do however not find any support for the model that predicts that the incumbent government transfer money to its own supporters

environmental policy and competitiveness the porter hypothesis and the composition of capital abstract the porter hypothesis suggests a win win situation in the sense that environmental policy improves both environment and competitiveness the suggestion received strong criticism from economists driven by the idea that if opportunities exist firms do not have to be triggered by an extra cost in this paper a model is developed which confirms this point but which also draws attention to some general mechanisms that relax the trade off considerably downsizing and 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

tightening environmental standards the benefit cost or the no cost paradigm ms ff ichael porter and claas van der linde have written a paper that is interesting and to us at least somewhat astonishing it is a defense of environmental regulation indeed an invitation to more stringent regulation that makes essentially no reference to the social benefits of such regulation this approach contrasts starkly with the methods that economists and other policy analysts have traditionally used when assessing environmental or other regulatory programs the traditional approach consists of comparing the beneficial effects of regulation with the costs that must be borne to secure these benefits for environmental regulation the social benefits include the reductions in morbidity or premature mortality that can accompany cleaner air the enhanced recreational opportunities that can result from water quality improvements the increased land values that might attend the cleanup of a hazardous waste site the enhanced vitality of aquatic ecosystems that might follow reductions in agricultural pesticide use or any of the other potentially significant benefits associated with tighter standards from this benefit cost approach emerges the standard tradeoff discussed in virtually every economics textbook porter and van der linde deny the validity of this approach to the analysis of environmental regulation claiming it to be an artifact of what they see as a static mindset in their view economists have failed to appreciate the capacity of

separation of powers and political budget cycles political budget cycles pbcs arise when the electorate is imperfectly informed about the incumbent s competence and the incumbent has discretion over the budget focusing on the second condition we study how separation of powers affects pbcs in the composition of government spending we find that the details of the budget process namely the bargaining rules the status quo s location and the degree of compliance with the budget law are critical for the existence and the amplitudes of pbcs in particular when the status quo is determined by the previous budget and there is high compliance with the budget law separation of powers acts as a commitment device which solves the credibility problems that drive pbcs

toward a new conception of the environment competitiveness relationship accepting a fixed trade off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress studies finding high environmental compliance costs have traditionally focused on static cost impacts ignoring any offsetting productivity benefits from innovation they typically overestimated compliance costs neglected innovation offsets and disregarded the affected industry s initial competitiveness rather than simply adding to cost properly crafted environmental standards can trigger innovation offsets allowing companies to improve their resource productivity shifting the debate from pollution control to pollution prevention was a step forward it is now necessary to make the next step and focus on resource productivity

electoral systems and public spending we study the effects of electoral institutions on the size and composition of public expenditure in oecd and latin american countries we emphasize the distinction between purchases of goods and services which are easier to target geographically and transfers which are easier to target across social groups we present a theoretical model in which voters anticipating government policymaking under different electoral systems have an incentive to elect representatives more prone to transfer public good spending in proportional majoritarian systems the model also predicts higher total primary spending in proportional majoritarian systems when the share of transfer spending is high low after dee ning rigorous measures of proportionality to be used in the empirical investigation we e nd considerable support for our predictions

corporate governance environmental regulations and technological change abstract this paper investigates the relationship between environmental regulations and innovation by focusing on the automobile industry in a cross country setting we provide empirical evidence that the presence of agency problems mitigates the negative effects of environmental regulations on overall r d activity which leads to full compensation when the degree of agency problems is sufficiently high guiding our empirical analysis we provide a general model consistent with the structure of existing ownership data specifically we model ownership structure as a combination of two extreme corporate governance types on the one extreme there are profit maximizers and on the other extreme there are managers who are only concerned with their private benefits the model leads to a simple country level ownership indicator and shows that if an economy is dominated by firms with higher agency problems then pollution tax might even increase overall r d while reducing pollution according to our estimations such an outcome is possible only for out of sample values of the ownership indicator where the degree of agency problems is extremely high

legislative budget cycles recent literature suggests that electoral budget cycles are a phenomenon of new rather than established democracies what part of the democratization process explains the amelioration of the political budget cycle we argue the answer lies in part in the development of a strong party system we extend the classic rogoff siebert model to show that political budget cycles are possible in a legislative context with rational voters we then demonstrate that the development of a strong party system can restrain political budget cycles in a majoritarian electoral system finally we follow prior work in using vote share volatility as a measure of the institutionalization of the party system using newly collected vote share data for 433 elections for 90 democracies from 1980 2007 we calculate a measure of party institutionalization we then use this data to demonstrate that institutionalized party systems are associated with mitigated political budget cycles especially in majoritarian electoral systems

a framework to compare environmental policies 1 introduction to analyze environmental policy proposals it is important to determine the conditions under which some policies might work better than others when will a pollution tax work better than the sale of permits or some other alternative which is easier to administer or to enforce does one policy apply better to some kinds of pollutants than to others which policy has a greater chance of getting enacted this paper provides a framework to compare alternative policies for each pollutant in each context one policy may be more efficient while others better account for competing objectives like administrative efficiency political feasibility and fairness using this framework the paper will analyze and compare eight types of policies clearly no single policy instrument will work best in all cases under some circumstances command and control cac instruments might be necessary in either of two forms i emission restrictions sometimes called performance standards or ii technology restrictions that might be called design standards if emissions are difficult or impossible to measure for example then the authorities can at least enforce rules that require the proper installation of the required pollution control equipment such as a flue gas desulfurization unit scrubber on every electric power plant or a catalytic converter on every automobile in other cases that are important to identify these cac instruments can be replaced by incentive instruments such as taxes subsidies or permits as suggested by pigou 1932 the pollution problem could be addressed by i taxes on the pollution or ii subsidies to abatement a pigouvian tax applies to the pollutant itself rather than to output at a rate equal to the pollutant s marginal environmental damages med the term incentive instruments includes both the pigouvian tax and the subsidy to abatement and it includes two other policies that involve permits such as those traded by electric utilities under the clean air act amendments of 1990 those permits could be i grandfathered or handed out to existing firms in proportion to past emissions or ii sold at auction by the government a simple analytical model is used below to demonstrate conditions under which the pigouvian tax is equivalent to a government sale of permits much of the environmental economics literature finds that the use of incentives is more cost effective than cac restrictions with imperfect information the regulatory authorities may or may not know what is the cheapest form of abatement technology thus cac regulations may require technology that is more expensive than necessary with a tax or a price per unit of emissions however each firm has incentives to find and to undertake any form of abatement that is cheaper than buying a permit since only the cheapest forms of abatement are undertaken these incentive policies can minimize the total cost of achieving any given level of pollution protection so far this cost effectiveness argument does not distinguish between taxes subsidies permits that are handed out or permits sold at auction yet the handout of permits does not raise any revenue thus a new literature in environmental economics concentrates on a distinction between policies that raise revenue like a tax on pollution or the sale of permits as opposed to polices that do not raise revenue like the handout of permits or a cac restriction on emissions 2 the model below will be used to reflect on this distinction as well so far i have listed two cac policies two pigouvian solutions and two versions of a permit policy yet in some cases with well defined property rights even with pollution coase 1960 shows how the private market can still achieve economic efficiency on its own government does not need to intervene at all except perhaps to help enforce property rights through a court system

the effects of environmental quality misperception on investments and regulation abstract this paper analyzes whether consumers misperception on the quality of the product influences firms investment choices we examine a setup with horizontal and vertical green differentiation where consumers are heterogeneous in the exogenous perception of environmental quality demands true qualities and profits are increasing in the perception of higher quality while the investment in green quality is high for high and low degrees of product substitutability we further consider the introduction of either an emission tax or an environmental standard both interventions increase the investment in green quality we show that for low marginal damages the environmental standard increases quality while taxation is more effective when the environmental damage is large

a theoretical foundation of the porter hypothesis abstract this letter shows that by reducing agency costs an environmental regulation may enhance pollution reducing innovation while at the same time increasing firms private benefit

the influence of chinese environmental regulation on corporation innovation and competitiveness abstract according to porter hypothesis appropriate environmental regulation can promote corporation innovation the innovation will even offset the corporation loss caused by environmental regulation and improve corporation competitiveness in order to explore the porter hypothesis practical situation in china this paper does an empirical study to explore this mechanism by using chinese pollution intensive corporations panel data samples during 2007 2012 results show that the implementation of flexible control policies has achieved initial success environmental regulation has significant positive effects on corporation s innovation but the fact of its weak effects also partly explains why environmental regulation still has negative effects on corporation competitiveness even it is insignificant from the point of regional differences east and middle regions have weak but not strong porter hypothesis phenomenon while that of the west region is not significant return on assets roa and gross domestic product gdp in the east region are relatively higher which is not based on high energy consumption and environmental pollution but due to the high transformation rate of research and development expenditure r d to roa for the middle region even it shows signs of the strong porter hypothesis but due to the fact that government gives fiscal subsidies and tax returns to companies to cover the cost from environmental regulation it only has the weak but not strong porter hypothesis phenomenon since this mechanism is not consistent with that of porter hypothesis

attribution error in economic voting evidence from trade shocks this article exploits the international transmission of business cycles to examine the prevalence of attribution error in economic voting in a large panel of countries from 1990 to 2009 we find that voters on average exhibit a strong tendency to oust the incumbent governments during an economic downturn regardless of whether the recession is home grown or merely imported from trading partners however we find important heterogeneity in the extent of attribution error a split sample analysis shows that countries with more experienced voters more educated voters and possibly more informed voters all conditions that have been shown to mitigate other voter agency problems do better in distinguishing imported from domestic growth jel e3 e6

distribution of environmental costs and benefits additional distortions and the porter hypothesis the porter hypothesis argues that environmental regulations benefit firms by fostering innovation we discuss four examples consistent with this idea highlighting either the distribution of benefits or costs or the presence of some additional distortion other than pollution examples are organized according to the list of market failures adding any one market failure creates the possibility that firms benefit from regulations while each example can be fully consistent with the porter hypothesis it is also possible that regulations benefit firms even without fostering innovation a result that would be empirically difficult to distinguish from the porter hypothesis

end of pipe or cleaner production how to go green in presence of income inequality and pro environmental behavior in this paper we consider a vertically differentiated duopoly model in which a green producer competes with a brown rival in a market in which consumers are environmentally concerned in particular consumers are assumed to value not only the intrinsic quality of a certain product but also its environmental impact this environmental valuation has a positional content consumers attach a positive attribute to the green product while penalizing the brown one in this context we consider the choice of the green firm between cleaner and end of pipe abatement efforts we find that the interplay between the intensity of market competition consumers income disparity and environmental concern can play a crucial role in directing the green producer towards one or the other technological choice more precisely the adoption of cleaner production technologies can be discouraged by low average income and by tough competition while it can be spurred by the moral social incentive towards pro environmental behavior

transparency political polarization and political budget cycles in oecd countries we investigate the effects of fiscal transparency and political polarization on the prevalence of electoral cycles in fiscal balance while some recent political economy literature on electoral cycles identifies such cycles mainly in weak and recent democracies in contrast we show conditioning on a new index of institutional fiscal transparency that electoral cycles in fiscal balance are a feature of many advanced industrialized economies using a sample of 19 oecd countries in the 1990s we identify a persistent pattern of electoral cycles in low er transparency countries while no such cycles can be observed in high er transparency countries furthermore we find in accordance with recent theory that electoral cycles are larger in politically more polarized countries

dynamic factor demands and the effects of energy price shocks a dynamic model is used to understand how sharp changes in energy prices affect investment behavior employment and energy use the authors discuss the theory behind their model selection model specifications estimation methods and data list parameter estimates and elasticities for the selected model and describe the simulations they conclude that 1 the data strongly reject the hypothesis of constant returns to scale within their specification of aggregate production 2 the data indicate adjustment costs on labor are small and 3 their results help reconcile some of the conflicting estimates of energy demand elasticities appearing in recent literature 23 references 3 figures 3 tables

electoral goals and center state transfers a theoretical model and empirical evidence from india we construct a model of redistributive politics where the central government is opportunistic and uses its discretion to make transfers to state governments on the basis of political considerations these considerations are the alignment between the incumbent parties at the central and state levels and whether a state is a swing state or not a testable prediction from the model is that a state that is both swing and aligned with the central government is especially likely to receive higher transfers we test this prediction using indian data for 14 states from 1974 75 to 1996 97 we find that a state which is both aligned and swing in the last state election is estimated to receive 16 higher transfers than a state which is unaligned and non swing

a stable international monetary system emerges inflation targeting is bretton woods reversed a stable international monetary system has emerged since the early 1990s a large number of industrial and a growing number of developing countries now have domestic inflation targets administered by independent and transparent central banks these countries place few restrictions on capital mobility and allow their exchange rates to float the domestic focus of monetary policy in these countries does not have any obvious international cost inflation targeters have lower exchange rate volatility and less frequent sudden stops of capital flows than similar countries that do not target inflation inflation targeting countries also do not have current accounts or international reserves that look different from other countries this system was not planned and does not rely on international coordination there is no role for a center country the imf or gold it is durable in contrast to other monetary regimes no country has been forced to abandon an inflation targeting regime succinctly it is the diametric opposite of the post war system bretton woods reversed

market inertia and the introduction of green products can strategic effects justify the porter hypothesis if according to porter s hypothesis a greener strategy is more profitable why may its implementation need regulatory intervention we present a repeated cournot duopoly where the market may exhibit inertia towards the adoption of even cost efficient environmental goods with consumers recognizing that a product is green only with a time lag if a firm unilaterally adopts the green product initially loses profit due to a increased costs direct effect and b reduced market share strategic effect by imposing simultaneous adoption regulation eliminates b thus enhancing long run profitability through a similar mechanism a government can increase its domestic firms international market share and profits by forcing them to simultaneously adopt the green product

strategic policy and environmental quality helping the domestic industry to provide credible information this paper shows that a country can improve an industry s competitiveness by requiring domestic firms to produce at the environmental standards at which they claim to produce or otherwise impose a penalty on those firms found cheating competitiveness will improve because this regulation will help the domestic industry to provide credible information about the environmental quality of its production the credible information will differentiate domestic products from other products on the world market and in this way increase consumers willingness to pay for domestic products even if the government has no preferences for environmental quality it has incentives to regulate its cheaters in order to help the domestic industry to provide credible information and thereby improve competitiveness

strategic quality competition and the porter hypothesis abstract this paper offers new support for the porter hypothesis within the context of a quality competition framework we use a duopoly model of vertical product differentiation in which two firms simultaneously choose to produce either a high environmentally friendly quality or low standard quality variant of a good before engaging in price competition in this simple setting we show that a nash equilibrium of the game featuring the low quality good can be pareto dominated by a different strategy profile in which both firms opt in favour of the green product our analysis demonstrates that in such a case both firms stand to profit from the introduction of a rule penalizing any firm refusing to produce the environmentally friendly product we also find that consumers themselves may benefit from such regulations this is always the case when shifting from low quality to high quality production brings about a cost efficiency improvement

politics and business cycles in industrial democracies politics alberto alesina influences from political competition on macroeconomic policy are often thought to be a source of economic fluctuations politicians are described as being driven by two not mutually exclusive main motivations they want to be reelected and they harbour political or ideological biases when such theories are confronted with actual cycles in a number of industrial countries the pattern of inflation unemployment output and budget deficits indicates that partisan policy making is a fairly widespread phenomenon with more limited evidence that electoral preoccupations result in major fluctuations the combination of partisanship and electoral cycles may easily result in socially undesirable outcomes in particular the degree of politico institutional stability and the independence of the central bank have a bearing on macroeconomic outcomes these observations raise a number of important questions about the design of political institutions

the monopolist is not the best environmentalist s best friend an example this letter addresses the second degree price discrimination issue when a monopolized product is tied with environmental quality the monopolist may degrade environmental quality too much when marginal valuations of environmental quality and the good itself are positively related across consumers

opportunistic political cycles test in a young democracy setting this paper tests the theory of opportunistic cycles in a decade old democracy russia finds strong evidence of cycles and provides an explanation for why previous literature often found weaker evidence using regional monthly panel data we find that 1 the budget cycle is sizable and short lived public spending shifts toward direct monetary transfers to voters 2 the magnitude of the cycle decreases with democracy government transparency media freedom voter awareness and over time and 3 preelectoral manipulation increases incumbents chances for reelection the short length of the cycle explains underestimation of its size by previous literature because of low frequency data used in previous studies

the efficient estimation of econometric models with rational expectations the efficient estimation of econometric models with rational expectations by the substitution method usually entails the use of a non linear simultaneous equations estimator and hence is not very attractive computationally it is shown that for a wide class of problems efficient estimates can also be obtained with standard estimation methods if instead an errors in variables approach is used for many other problems although not providing fully efficient estimates because rationality is not imposed the errors in variables method will still have a strong appeal because otherwise it uses all of the structural information in the model unlike the substitution method when an incomplete information set is used it guarantees consistent estimates and it is easy to compute

the impact of federal spending on house election outcomes while it is widely believed by academics politicians and the popular press that incumbent members of congress are rewarded by the electorate for bringing federal dollars to their district the empirical evidence supporting that claim is extremely weak one explanation for the failure to uncover the expected relationship between federal spending and election outcomes is that incumbents who expect to have difficulty being reelected are likely to exert greater effort in obtaining federal outlays since it is generally impossible to adequately measure this effort the estimated impact of spending is biased downward because of an omitted variable bias we address this estimation problem using instrumental variables for each house district we use spending outside the district but inside the state containing the district as an instrument for spending in the district federal spending is affected by a large number of actors e g governors senators mayors and other house members in the state delegation

environmental innovations and firm profitability unmasking the porter hypothesis we examine impacts of different types of environmental innovations on firm profits following porter s sci am 264 4 168 1991 hypothesis that environmental regulation can improve firms competitiveness we distinguish between regulation induced and voluntary environmental innovations we find that innovations which do not improve firms resource efficiency do not provide positive returns to profitability however innovations that increase a firm s resource efficiency in terms of material or energy consumption per unit of output have a positive impact on profitability this positive result holds for both regulation induced and voluntary innovations although the effect is greater for regulation driven innovation we conclude that the porter hypothesis does not hold in general for its strong version but depends on the type of environmental innovation our findings rest on firm level data from the german part of the community innovation survey 2008 cis 2008

duopoly and quality standards abstract in the absence of sunk costs a low quality producer benefits from a mildly restrictive quality standard whereas a high quality producer suffers from it consumers welfare increases if the firm producing the higher quality does not increase its quality significantly in response to the increase in quality by its rival a sufficiently severe standard causes exit from the industry when there are no sunk cost the high quality producer exits first

environmental policy the porter hypothesis and the composition of capital effects of learning and technological progress abstract in this paper the effect of environmental policy on the composition of capital is investigated by allowing for nonlinearities it generalizes xepapadeas and de zeeuw j environ econ manage 37 1999 165 and determines scenarios in which their results do not carry over in particular we show that the way acquisition cost of investment decreases with the age of the capital stock is of crucial importance we also focus more explicitly on learning and technological progress among others we obtain that in the presence of learning implementing a stricter environmental policy with the aim to reach a certain target of emissions reduction has a stronger negative effect on industry profits which implies quite the opposite as to what is described by the porter hypothesis