Foreign Direct Investment and Pollution Havens
AbstractIt has been often argued that pollution-intensive industries locate in places with weak environmental standards, turning these locations into “pollution havens”. The present paper tests the pollution haven hypothesis employing a matched data on foreign direct investment flows and environmental stringency for Eastern Europe. Exploiting the panel data properties we are able to address omitted variable bias, specification, and measurement errors, which weaken many empirical studies. Our results suggest that environmental stringency indeed affects location choice in Eastern Europe. However, weak environmental levies are a significant attraction for foreign direct investment only from developing and transition countries.
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Bibliographic InfoArticle provided by Economics and Econometrics Research Institute (EERI), Brussels in its journal Journal of Economics and Econometrics.
Volume (Year): 54 (2011)
Issue (Month): 1 ()
FDI; Environmental Economics and Policy; Environmental Stringency; International Relations; Trade; Pollution Haven Hypothesis.;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F18 - International Economics - - Trade - - - Trade and Environment
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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