Pollution haven hypothesis and environmental impacts of foreign direct investment: The case of industrial emission of sulfur dioxide (SO2) in Chinese provinces
AbstractRecognizing the complex inter-correlation between FDI, emission and the three economic determinants of emission, we constructed a simultaneous model to study the FDI-emission nexus in China by exploring both the dynamic recursive FDI entry decision and the linkage from FDI entry to final emission results under the intermediation of the scale, composition and technique effects. The model is then estimated on the panel data of Chinaâs 29 provincesâ industrial SO2 emission. Result shows that, exerting through different channels; the total impact of FDI on industrial SO2 emission is very small. With 1% increase in FDI capital stock, industrial SO2 emission will increase by 0.099%, in which the emission increase caused by impact of FDI on economic growth and composition transformation cancels out the emission reduction result due to FDIâs role in reinforcement of environmental regulation. By introducing to the simultaneous system the recursive dynamism that supposes FDI entry decision to depend on last periodâs economic growth and environmental regulation stringency, our model also provides convincing supportive evidences for âPollution havenâ hypothesis. Although FDI enterprises in China generally produce with higher pollution efficiency, the rise in environmental regulation stringency still has modest deterrent effect on FDI capital inflow. Furthermore, the composition transformation impact of FDI in China seems to be dominated by the inflow of foreign capital pursuing a âproduction platformâ that provides lower pollution regulation compliance cost.
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Bibliographic InfoArticle provided by Elsevier in its journal Ecological Economics.
Volume (Year): 60 (2006)
Issue (Month): 1 (November)
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Other versions of this item:
- Jie HE, 2005. "Pollution haven hypothesis and Environmental impacts of foreign direct investment: The Case of Industrial Emission of Sulfur Dioxide (SO2) in Chinese provinces," Working Papers 200506, CERDI.
- Jie He, 2011. "Pollution haven hypothesis and Environmental impacts of foreign direct investment: The Case of Industrial Emission of Sulfur Dioxide (SO2) in Chinese provinces," Working Papers halshs-00564699, HAL.
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