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Foreign Direct Investment and Environmental Taxes

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  • Roberto A. De Santis
  • Frank Stähler

Abstract

This paper studies the effect of foreign direct investment (FDI) on environmental policy stringency in a two-country model with trade costs, where FDI could be unilateral and bilateral and both governments address local pollution through environmental taxes. We show that FDI does not give rise to ecological dumping because the host country has an incentive to shift rents away from the source country toward the host country. Environmental policy strategies and welfare effects are studied under the assumption that parameter values support FDI to be profitable. Copyright 2008 The Authors. Journal Compilation Verein für Socialpolitik and Blackwell Publishing Ltd. 2008.

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Bibliographic Info

Article provided by Verein für Socialpolitik in its journal German Economic Review.

Volume (Year): 10 (2009)
Issue (Month): (02)
Pages: 115-135

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Handle: RePEc:bla:germec:v:10:y:2009:i::p:115-135

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  1. James R. Markusen & Keith E. Maskus, 1999. "Discriminating Among Alternative Theories of the Multinational Enterprise," NBER Working Papers 7164, National Bureau of Economic Research, Inc.
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  10. De Santis, Roberto A & Frank Stahler, 2002. "Endogenous Market Structures and the Gains from Foreign Direct Investment," Royal Economic Society Annual Conference 2002 56, Royal Economic Society.
  11. Wolfgang Keller & Arik Levinson, 2002. "Pollution Abatement Costs and Foreign Direct Investment Inflows to U.S. States," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 691-703, November.
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  14. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, December.
  15. Matthew A. Cole & Robert J. R. Elliott & Per G. Fredriksson, 2006. "Endogenous Pollution Havens: Does FDI Influence Environmental Regulations?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(1), pages 157-178, 03.
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  17. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
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  19. Andreas HaufLer & Guttorm Schjelderup & Frank Stähler, 2005. "Barriers to Trade and Imperfect Competition: The Choice of Commodity Tax Base," International Tax and Public Finance, Springer, vol. 12(3), pages 281-300, May.
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Citations

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Cited by:
  1. Robert Elliott & Ying Zhou, 2013. "Environmental Regulation Induced Foreign Direct Investment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 55(1), pages 141-158, May.
  2. Shuichi Ohori, 2011. "Environmental policy instruments and foreign ownership," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(1), pages 65-78, January.
  3. Savoiu, Gheorghe & Dinu, Vasile & Ciuca, Suzana, 2013. "Foreign Direct Investment based on Country Risk and other Macroconomic Factors. Econometric Models for Romanian Economy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 39-61, March.

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