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Strategic Environmental Policies in the Presence of Foreign Direct Investment

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  • M. Kayalica

    ()

  • Sajal Lahiri

Abstract

We analyze strategic environmental standards in the presence of foreign direct investment. A number of foreign firms located in a host country compete with a domestic firm in another country to export a homogeneous good to a third country. When the number of foreign firms is exogenous, the host country applies a stricter environmental regulation than the other producing country. However, under free entry and exit of foreign firms, the host country may apply a less severe standard under both non-cooperative and cooperative equilibrium. We also find that the nature market structure does not affect the equilibrium values of total pollution if export subsidies are also used. Copyright Springer 2005

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File URL: http://hdl.handle.net/10.1007/s10640-004-0757-3
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

Volume (Year): 30 (2005)
Issue (Month): 1 (January)
Pages: 1-21

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Handle: RePEc:kap:enreec:v:30:y:2005:i:1:p:1-21

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: environment; emission permits; foreign direct investment; trade; pollution;

References

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  1. Wayne B. Gray, 1997. "Manufacturing Plant Location: Does State Pollution Regulation Matter?," NBER Working Papers 5880, National Bureau of Economic Research, Inc.
  2. Sajal Lahiri & Yoshiyasu Ono, 2000. "Protecting the environment in the presence of foreign direct investment: tax versus quantity restriction," Economics Discussion Papers 506, University of Essex, Department of Economics.
  3. Martin D. D. Evans & Richard K. Lyons, 2003. "Are Different-Currency Assets Imperfect Substitutes?," CESifo Working Paper Series 978, CESifo Group Munich.
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Citations

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Cited by:
  1. Francesca Sanna-Randaccio & Roberta Sestini & Ornella Tarola, 2014. "Unilateral Climate Policy and Foreign Direct Investment with Firm and Country Heterogeneity," Working Papers 2014.55, Fondazione Eni Enrico Mattei.
  2. Baomin Dong & Jiong Gong & Xin Zhao, 2012. "FDI and environmental regulation: pollution haven or a race to the top?," Journal of Regulatory Economics, Springer, vol. 41(2), pages 216-237, April.
  3. Celik, Sule & Orbay, Benan Zeki, 2011. "Location choice under trade and environmental policies," Economic Modelling, Elsevier, vol. 28(4), pages 1710-1715, July.
  4. Robert J R Elliott & Ying Zhou, 2013. "Environmental Regulation Induced Foreign Direct Investment," Discussion Papers 13-08, Department of Economics, University of Birmingham.
  5. Paul Missios & Halis Murat Yildiz & Ida Ferrara, 2009. "Foreign Direct Investment and the Choice of Environmental Policy," Working Papers 004, Ryerson University, Department of Economics.

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