The Impact of Environmental Regulation on Firm and Country Competitiveness: A Meta-Analysis of the Porter Hypothesis

Abstract

Since the early 1990s, the validity of the Porter Hypothesis has been the focus of intense research to establish whether well-designed environmental regulation may enhance -rather than reduce -competitiveness. However, little consensus exists on the extent to which environmental regulation might generate profitability enhancing innovation offsets. This paper reports on a meta-analysis of 103 publications which estimate the relationship between environmental regulation and firm or country-level productivity or competitiveness. We find considerable heterogeneity in both the sign and significance level of over 2,000 estimated "effect sizes" in these studies. A positive effect of environmental regulation is more likely at the state, region or country level, compared to facility, firm or industry levelalthough in both cases the most likely scenario is statistical insignificance. These findings are consistent with the strong version of the Porter Hypothesis whereby strict but flexible environmental regulations induce innovation and over time increase country-level competitiveness.

Environmental regulation and innovation in renewable energy technologies: Does the policy instrument matter?

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Permit allocation rules and investment incentives in emissions trading systems

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Exploring the Effects of Government Policies on Economic Performance: Evidence Using Panel Data for Korean Renewable Energy Technology Firms

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