Taxation and Technology Adoption: A Hotelling Approach

Kriechel, Ben and Ziesemer, Thomas (2006). Taxation and Technology Adoption: A Hotelling Approach. UNU-MERIT.

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UNU-MERIT Working Papers

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  • Author Kriechel, Ben
    Ziesemer, Thomas
    Title Taxation and Technology Adoption: A Hotelling Approach
    Publication Date 2006
    Publisher UNU-MERIT
    Abstract Environmental regulation and competitiveness are issues that seem to be at odds. However, the `Porter Hypothesis' states that firms can actually gain in competitiveness if they are subject to stricter environmental regulation. We show in a simple model the basic setting of the problem to apply it then to a Hotelling framework. A non-adoption tax (adoption subsidy) is shown to destroy a non-adoption equilibrium in a closed economy model. We show that taxes not directly targeting the non-adoption problem may fail to have an adoption incentive on the firms. In an open economy model the Porter Hypothesis is shown to hold if (i) non-adoption taxes are higher than adoption costs for one country and lower for the other, and (ii) the returns of second adoption are insufficient to cover the net adoption costs.
    Copyright Holder UNU-MERIT
    Copyright Year 2006
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    Created: Wed, 11 Dec 2013, 16:07:34 JST