ENVIRONMENTAL POLICY STRINGENCY: MEASUREMENTS AND EFFECTS

The PhD thesis is about measurement and effects of environmental policy in the context of the Porter Hypothesis (PH). The first chapter offers a critical review of the large empirical literature on the Porter Hypothesis. The second chapter presents an empirical investigation of the Porter Hypothesis focusing on the manufacturing sectors of European countries between 1997 and 2009. We look at overall innovation and productivity impact that are the most relevant indicators for the “strong” PH. This approach allows us to account for potential opportunity costs of induced innovations. As a proxy of environmental policy stringency we use pollution abatement and control expenditures (PACE), which represent one of the few indicators available at the sectoral level. We remedy upon its main drawback, that of potential endogeneity of PACE, by adopting an instrumental variable estimation approach. The third chapter represents a novel approach, inspired by the literature on multilevel latent models and Item Response Theory, to assessing countries’ environmental and energy policy performance. We use data on energy efficiency policy targeting industrial sectors in 27 EU countries between 2004 and 2009 and rank countries with respect to their ability to implement policy over time. Unlike previous contributions in this respect, our model accounts for the inherent difficulty of a given policy instrument mix. Moreover, the model is extended to deal with the longitudinal data and to adjust the country ranking as a result of economic and institutional observables, which are likely to affect policy design and implementation.