The Proof Dilemma of Porter’s Hypothesis:Analysis of Its Verification Difficulties

The Porter Hypothesis,proposed by Michael E.Porter,suggests that stringent environmental regulations can enhance corporate innovation and competitiveness,challenging the traditional view that regulations increase business costs.It argues that regulations motivate firms to innovate,leading to improved productivity,cost reductions,and new market opportunities.However,there are proponents and critics in academia regarding the hypothesis.Supporters claim regulations change corporate behavior,reducing agency costs and boosting research and development.Critics argue that if win-win situations exist,businesses would naturally pursue them without regulatory incentives.Key challenges in proving or refuting the hypothesis include its various versions,the difficulty in quantifying innovation and competitiveness,the complex interplay between regulation,innovation,and competitiveness,and the varying impacts across industries and regions.Additionally,the effects may require a long time to manifest,and the hypothesis’s applicability is influenced by evolving environmental policies and market environments.Despite mixed empirical findings,the Porter Hypothesis provides a valuable framework for understanding the relationships among environmental regulation,innovation,and competitiveness,but its validation requires a more comprehensive assessment.

Does strict environmental regulation enhance the global value chains position of China's industrial sector?

Given the vital importance of global value chains(GVCs)position for a country's international competitiveness,this paper tries to investigate the impacts of environmental regulation on the GVCs position of China's industrial sector.Using the latest value-added decomposition method,we first measure the GVCs position of China's industrial sector from 2003 to 2014.Subsequently,both two-stage least squares(2 SLS)method with panel data and mediating effect model are employed to empirically examine the effects of environmental regulation on China's position in GVCs.The results indicate that environmental regulation has significantly upgraded the GVCs position of China's industrial sector,and the effect is more evident for the sub-sectors with originally lower GVCs position.The mediation effect test shows that increasing R&D investment is an important channel through which environmental regulation affects the GVCs position of China's industrial sector,which verifies the existence of the Porter hypothesis.Further analysis finds that the enhancement of GVCs position of China's industrial sector caused by environmental regulation is mainly achieved through reducing the backward GVCs position.

Environmental Technical Standards and the Green Transition of China’s Manufacturing Industry

Distinct from the existing literature conforming to the Porter hypothesis which emphasizes the technological innovation mechanism,this paper examines the mechanism of technological transformation through which environmental technical standards influence the manufacturing industry in reducing emissions and improving efficiency(i.e.green transition).Furthermore,drawing upon enterprise samples from the databases of Chinese Industrial Enterprises and Chinese Industrial Pollution Sources from Major Monitored Enterprises,it empirically validates the results of the theoretical analysis.Overall,our research reveals that environmental technical standards can propel manufacturing enterprises to reduce pollution and increase productivity by following an incremental path of technological transformation,thereby achieving a green transition.Moreover,environmental technical standards indirectly promote green technology innovation in the upstream equipment manufacturing enterprises.Heterogeneity analysis further shows that environmental technical standards have a stronger effect of green transition on those companies with higher pollution emission intensity,lower productivity,slower capital renewal and stronger financing capacity prior to implementing the environmental policies.

Whether to Abolish or Introduce Dual Regulation as Trade and Environmental Policy?

China,which has already introduced an environmental tax in an effort to decarbonize,has recently begun emissions trading and is using two environmental policies in tandem,but there are concerns about the impact on growth and trade.Trade and environmental policies affect firms'entry and exit,resulting in changes in aggregate productivity and pollution emissions.This study compares the impacts of single regulation and dual regulation on welfare,using a research-and-development based growth model with heterogeneous firms.Under single regulation,the cleansing effect of trade liberalization could be undermined.Under dual regulation,trade liberalization decreases pollution and improves average productivity whereas decreasing total permits reduces pollution.From the perspective of improving welfare it is desirable to choose dual regulation because trade liberalization can reduce total pollution emissions via the cleansing effect of trade liberalization.