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Foreign Direct Investment and Pollution Havens

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  • John King

Abstract

It 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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File URL: http://www.eeri.eu/documents/jee/JEE_2011_01_04.pdf
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Bibliographic Info

Article provided by Economics and Econometrics Research Institute (EERI), Brussels in its journal Journal of Economics and Econometrics.

Volume (Year): 54 (2011)
Issue (Month): 1 ()
Pages: 39-47

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Handle: RePEc:eei:journl:v:54:y:2011:i:1:p:39-47

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Related research

Keywords: FDI; Environmental Economics and Policy; Environmental Stringency; International Relations; Trade; Pollution Haven Hypothesis.;

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Cited by:
  1. Bandelj, Nina, 2006. "Cultural Understandings of Economic Globalization: Discourse on Foreign Direct Investment in Slovenia," MPIfG Discussion Paper 06/1, Max Planck Institute for the Study of Societies.
  2. Ackerman Maarten & Charlotte du Toit, 2001. "A supply side approach for estimating a Neo-classical fixed investment model for the South African economy," EERI Research Paper Series EERI_RP_2001_05, Economics and Econometrics Research Institute (EERI), Brussels.
  3. Ari Kokko & Victoria Kravtsova, 2012. "Regional Characteristics And Effects Of Inward Fdi: The Case Of Ukraine," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 3(2).
  4. Lawrence P. King, 2003. "Explaining Postcommunist Economic Performance," William Davidson Institute Working Papers Series 2003-559, William Davidson Institute at the University of Michigan.
  5. Patrick Hamm & David Stuckler & Lawrence King, 2010. "The Governance Grenade: Mass Privatization, State Capacity and Economic Growth in Post-communist Countries," Working Papers wp222, Political Economy Research Institute, University of Massachusetts at Amherst.
  6. Patrick Hamm & Lawrence King, 2010. "Post-Manichean Economics: Foreign Investment, State Capacity and Economic Development in Transition Economies," Working Papers wp227, Political Economy Research Institute, University of Massachusetts at Amherst.
  7. Takacs, Istvan & Liebmann, Lajos, 2011. "Role of Foreign Direct Investment in Restructuring of Agribusiness in the CEE Countries Following the Transition," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 116339, European Association of Agricultural Economists.

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