Voluntary environmental programs and technical efficiency: Another examination of the Porter hypothesis

Scope and method of study. The Porter Hypothesis argues that properly designed environmental regulation not only increases environmental quality, but also makes firms more technically efficient. The purpose of this study is to empirically test the validity of the Porter Hypothesis by investigating the impact of complying with properly designed environmental programs (the U.S. EPA's 33/50 Program and the Canadian ARET Program) on participants' technical efficiencies. Motivated by the idea of methodology crosschecking, this study applies both parametric and nonparametric methods to measure the efficiencies.; Findings and conclusions. Empirical results indicate that the majority of participating firms have experienced significant increases in their efficiencies since participation, relative to matched firms. Furthermore, results suggest that reducing pollution has led to innovations among participating firms. The above evidence supports the Porter Hypothesis. In addition, both parametric and non-parametric models produced relatively similar results. It appears that both models are good tools to measure a firm's efficiency. This study also uses the procedures described in Grosskopf and Valdmanis (1987). A between-group efficiency index is estimated to determine whether the frontier of before-participation and after-participation firms differs. Empirical results from this particular methodology also support the Porter Hypothesis...