Reconciling the Porter hypothesis with the traditional paradigm about environmental regulation: a nonparametric approach
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This paper estimates the impact of pollution abatement investments on the production technology of firms by pursuing two new directions. First, we take advantage of recent econometric developments in productivity, efficiency analysis and nonparametric kernel regression by adopting a conditional nonparametric frontier analysis. Second, we focus not only on the average effect but also search for potential nonlinearities. We provide new results suggesting that pollution abatement capital affects with a bell-shaped fashion technological catch-up (inefficiency distribution) and does not affect technological change (shifts in the frontier). These results have relevant implications both for modeling and for the purposes of advice on environmentally friendly policy.
KeywordsConditional nonparametric frontier analysis Full and partial order frontiers Location-scale nonparametric regression Infinite order cross-validated local polynomial regression Separability condition Porter hypothesis
We thank the editor William Greene, an associate editor and three anonymous referees for many useful suggestions. We are grateful to Jeffrey Racine for insights about infinite order cross-validated local polynomial regression and their computation, Léopold Simar for providing the Matlab code to compute the separability test, and Yves Surry and Massimiliano Mazzanti for insightful discussions on results. We also thank conference and seminar participants at the Panel Data Conference (Budapest, 2014), Nongh Lam University (Ho Chi Minh City, 2015), University of Ferrara (Ferrara, 2015), 8th VEAM (Thai Nguyen, 2015), Hoa Sen University (Ho Chi Minh City, 2015), Lameta seminar (Montpellier, 2016), 10th JRSS (Paris, 2016), and 15th EAAE Congress (Parma, 2017). A preliminary version of this paper was titled “The impact of pollution abatement investments on production technology: a nonparametric approach”. This work was funded by the French “Agence Nationale de la Recherche”(project ANR-11-ALID-0002). We would like to dedicate this paper in memoriam to our friend Jean-Pierre Huiban who initiated this research.
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Conflict of interest
The authors declare that they have no conflict of interest.
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