The conundrum of Porter Hypothesis, Pollution Haven Hypothesis, and Pollution Halo Hypothesis: evidence from the Indian manufacturing sector

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NCAER Virtual Dialogue Room | JEL Code: Q5

Presenter:
Prantik Bagchi, PhD (IIT Madras)¹

Discussant:
Shyamasree Dasgupta, PhD (Jadavpur)²

 Moderator:
Chetana Chaudhuri, PhD (JNU) – In House

 Abstract:

In the globalised world, factors such as environmental regulations and outcomes are interlinked with foreign direct investment and technological innovation. However, firm-level theories mostly treat them independently. We have filled the gap by carrying out empirical research with an integrated approach at the firm level. The theoretical framework is based on Porter’s hypothesis and the pollution haven hypothesis/pollution halo hypothesis. We collect the data from the Center for Monitoring Indian Economy Prowess IQ and the Ministry of Environment, Forest, and Climate Change. Using the modified Krugman specialisation index, we find that Indian manufacturing firms are neither converging nor specialised in terms of technical progress. Estimating a z-score for environmental stringency, we interact that with the pollution loads of the firms. Our findings suggest that environmental regulation does not ensure a “win-win” situation for the producers, refuting Porter’s hypothesis. Rather, factors such as profit margin and R&D produce robust results across different models to induce the productivity of the firm. One of the concerning facts is that older firms using vintage capital are detrimental to productivity enhancement, and there is evidence of layoffs at the cost of increasing profits to improve the firm’s performance. Also, more dependence on materials by export-intensive firms increases the cost and, thereby, reduces productivity. In addition, we apply a panel threshold regression model and conclude that there is evidence of a single threshold, and irrespective of the choice of technology, foreign firms induce the energy intensity, confirming a pollution Haven hypothesis.

Short bios:

¹ Dr. Bagchi is currently working as an Assistant Professor in the Department of Humanities and Social Sciences at IIT Kharagpur. His prior work experiences include IIM Shillong and Madras School of Economics. He completed his PhD from IIT Madras and was a recipient of the Post-Doctoral Equivalent Fellowship for submitting the Thesis in three years and getting the best reviews. His area of interest lies in Natural Resources and Environmental Economics, Energy Economics, and Applied Microeconometrics. He has published papers in several journals, including Annals of Operations Research (ABDC A), Technological Forecasting and Social Change (ABDC A), Journal of Cleaner Production (ABDC A), and many other reputed journals. He has reviewed articles in different Journals, viz. Studies in Microeconomics, Journal of Quantitative Economics, Journal of Safety Science and Resilience, and Transactions on Consumer Electronics (IEEE). He is working as an Associate Editor in SN Business and Economics. His works are featured in IITM TechTalk, The Hindu Business Line, The Times of India, The Telegraph, Press Information Bureau (Chennai), and others. His students received Best Paper Awards in many conferences, such as the 3rd Annual Economic Summit, St. Xavier’s University Kolkata, and the International Humanities and Social Sciences Student Colloquium at BITS Pilani, Dubai (IHSSRC).

² Dr. Dasgupta is an Associate Professor and Chair in the School of Humanities and Social Sciences at IIT Mandi. She is an economist by training. Her teaching and research interests remain in the areas of energy, environment, and climate change. She earned her BS in Economics from Calcutta University and her MA from Delhi School of Economics.  She obtained PhD from Jadavpur University, Kolkata. She was visiting researchers at Utrecht School of Economics, Netherlands; Joint Global Change Research Institute at Pacific Northwest National Laboratory, USA; and the University of Stavanger, Norway. She has several publications in reputed peer-reviewed journals, namely, Energy Economics (ABDC A*), Energy Policy (ABDC A), Natural Hazards, etc. She has been a member of the Working Group constituted by the Department of Science and Technology, Government of India, related to the Himalayan Ecosystem for preparation of India’s Adaptation Communication to UNFCCC and a Contributing Author in Working Group III to IPCC AR5.

For more information, contact:
Souryabrata Mohapatra, PhD (Auckland)
smohapatra@ncaer.org