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Prabal Roy Chowdhury
''The Porter hypothesis and hyperbolic discounting''
( 2011, Vol. 31 No.1 )
We examine pollution-reducing R&D by a monopoly firm producing a dirty product. In a dynamic framework with hyperbolic discounting, we establish conditions under which the Porter hypothesis goes through, i.e. environmental regulation increases R&D, thus reducing pollution, as well as increasing firm profits. This is likely to hold whenever R&D costs are at an intermediate level, and the planning horizon of the firms is large.
Keywords: Porter hypothesis, abatement tax, R&D, hyperbolic discounting.
JEL: Q5 - Environmental Economics: General
L2 - Firm Objectives, Organization, and Behavior: General
Manuscript Received : Apr 15 2010 Manuscript Accepted : Jan 07 2011

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