4. Conclusions
This paper analyzes the dynamics of the structural changes, industrial transitions, and its impacts on sustainable development in Taiwan. We focus on the environmental stress (or burden) that results from industrial transition and economic structural changes. Explicitly incorporating the Markov regime switching mechanism in a productivity framework, this study measures the firm’s dynamic adjustments when facing industrial transitions and structural changes.
The empirical dimensions of the harmful or potentially benign environmental effects of structural changes are assessed. Taiwan high technology industries (SIC 31 and 32) are much more sensitive to the industry transition and structural changes than other industries, reflected in the impacts of direct abatement effects and indirect abatement effects. Meanwhile, the high-technology industries are more flexible in adjustment mechanism and the pricing and scale expansion strategies. Overall speaking, we find significant impacts on the environmental stress (or burden) resulting from industrial transition and economic structural changes.
This paper also provides valid empirical evidence that allows us to re-examine the Porter hypothesis in considering industrial transition and structural changes. The presence of Porter hypothesis indicates that the suitable environmental regulation will initiate the motives of innovation. There are many examples and phenomena supporting Porter hypothesis suggest that a more stringent regulation is not always detrimental to productivity, instead it could stimulate an innovation offset. In this study, we further provide the evidence this innovation offset could happen even for developing economies under industrial transition and economic structural changes. The 6 industries all had gone through industrial transition or economic structural changes more than once during our study period 1992-2000. The Porter hypothesis is valid in five of the 6 Taiwan manufacturing plant level data in a broadly perspective. Only the Food and Beverage Manufacturing (SIC11) is the exception due to huge adjustment effects in adjusting to the new environmental standards, which may offset the innovation motive. Overall speaking, our investigation supports Porter hypothesis under industrial transition and economic structural changes in this dynamic setting.
