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FDI and pollution havens: Evidence from the Norwegian manufacturing sector

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  • Rezza, Alief A.
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    Abstract

    This is an empirical study of the firm and country determinants of foreign direct investment (FDI) and how it is affected by the stringency of environmental regulations in host countries. We employ disaggregated data on sales by Norwegian multinationals' affiliates from 1999 to 2005 that allow such affiliates to be categorized as either efficiency-seeking (vertical) or market-seeking (horizontal) FDI. While the environmental stringency of a host country and its enforcement are found to have no effect on the average investment, we find a significant negative effect on multinationals with vertical motives. Compared to those located in lenient countries, the efficiency-seeking affiliates in more environmentally regulated countries receive less investment from their parent companies in terms of (i) equity capital, (ii) capital stock, and (iii) assets. We further find that the total exports from affiliates to parent companies in Norway decrease with the level of enforced environmental stringency in the host countries.

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    Bibliographic Info

    Article provided by Elsevier in its journal Ecological Economics.

    Volume (Year): 90 (2013)
    Issue (Month): C ()
    Pages: 140-149

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    Handle: RePEc:eee:ecolec:v:90:y:2013:i:c:p:140-149

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    Web page: http://www.elsevier.com/locate/ecolecon

    Related research

    Keywords: Environmental regulations; Foreign direct investment; Pollution havens;

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