Environmental Policy and Environmental R&D in the Private Sector: New Evidence on the “Narrow” Porter Hypothesis

We examine the impact of the stringency of market-based and non-market-based environmental policies on private-sector environmental R&D expenditures. We find that the stringency of market-based environmental policies has a positive and statistically significant impact on environmental R&D expenditures in the private sector. In contrast, the stringency of non-market-based environmental policies is statistically insignificant. Thus, our findings provide evidence supporting the “narrow” Porter hypothesis.