TY - JOUR T1 - The Effect of Clean Water Regulation on Profitability: Testing the Porter Hypothesis JF - Land Economics JO - Land Econ SP - 329 LP - 344 DO - 10.3368/le.86.2.329 VL - 86 IS - 2 AU - Dylan G. Rassier AU - Dietrich Earnhart Y1 - 2010/05/01 UR - http://le.uwpress.org/content/86/2/329.abstract N2 - Previous theoretical research provides opposing arguments regarding the effect of environmental regulation on profitability. This study provides empirical evidence on this debated effect by testing the “strong” version of the Porter hypothesis. We employ panel data analysis to examine the effect of water regulation, as measured by permitted wastewater discharge limits, on the profitability of publicly held firms operating within the chemical manufacturing industries. We find that tighter water regulation meaningfully lowers profitability. By reinterpreting profitability in terms of sales and costs, the results demonstrate that tighter water regulation increases costs conditioned on a given level of sales. (JEL K23, Q52) ER -