IDEAS home Printed from https://ideas.repec.org/a/spr/endesu/v22y2020i5d10.1007_s10668-019-00403-7.html
   My bibliography  Save this article

Does industrial relocation alleviate environmental pollution? A mathematical economics analysis

Author

Listed:
  • Mingquan Li

    (Beihang University)

  • Qi Wang

    (Peking University)

Abstract

Industrial relocation and its environmental impact attract widespread attention. We incorporated environmental elements into the decision-making framework of industrial relocation and developed a mathematical economics model. With this model, we investigated the impact of environmental regulation on industrial relocation; we also compared the environmental impact after relocation with that before relocation. We found that regulation can affect relocation, but prerequisites exist. Some factors such as pollutant generation factor, pollutant treatment cost factor, and relocation cost are indispensable components of the prerequisites. We also found that impacts of regulation on relocations of pollution-intensive industries (PIIs) and clean industries are different, and pollutant generation factor and relocation cost are two critical factors leading to this difference. This result indicates that environmental regulation does not necessarily lead to a relocation of PIIs. Total amount and intensity of pollutant emissions increase after relocation, and the extent of increase is positively correlated with the regulation in the home country and negatively correlated with that in the host country. This result reveals that industrial relocation alleviates home country’s environmental pollution in the sacrifice of host country’s environment through emissions leakage. This research yields essential considerations in policy making of industrial relocation.

Suggested Citation

  • Mingquan Li & Qi Wang, 2020. "Does industrial relocation alleviate environmental pollution? A mathematical economics analysis," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(5), pages 4673-4698, June.
    • Handle: RePEc:spr:endesu:v:22:y:2020:i:5:d:10.1007_s10668-019-00403-7
    DOI: 10.1007/s10668-019-00403-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10668-019-00403-7
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10668-019-00403-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Paul Lanoie & Michel Patry & Richard Lajeunesse, 2008. "Environmental regulation and productivity: testing the porter hypothesis," Journal of Productivity Analysis, Springer, vol. 30(2), pages 121-128, October.
    2. Yuping Deng & Helian Xu, 2015. "International Direct Investment and Transboundary Pollution: An Empirical Analysis of Complex Networks," Sustainability, MDPI, vol. 7(4), pages 1-25, April.
    3. Cai, Xiqian & Lu, Yi & Wu, Mingqin & Yu, Linhui, 2016. "Does environmental regulation drive away inbound foreign direct investment? Evidence from a quasi-natural experiment in China," Journal of Development Economics, Elsevier, vol. 123(C), pages 73-85.
    4. Dam, Lammertjan & Scholtens, Bert, 2008. "Environmental regulation and MNEs location: Does CSR matter?," Ecological Economics, Elsevier, vol. 67(1), pages 55-65, August.
    5. Brian R. Copeland, 2013. "Trade and the Environment," Palgrave Macmillan Books, in: Daniel Bernhofen & Rod Falvey & David Greenaway & Udo Kreickemeier (ed.), Palgrave Handbook of International Trade, chapter 15, pages 423-496, Palgrave Macmillan.
    6. Myeong Hwan Kim & Nodir Adilov, 2012. "The lesser of two evils: an empirical investigation of foreign direct investment-pollution tradeoff," Applied Economics, Taylor & Francis Journals, vol. 44(20), pages 2597-2606, July.
    7. Zeng, Dao-Zhi & Zhao, Laixun, 2009. "Pollution havens and industrial agglomeration," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 141-153, September.
    8. Ben Kheder, Sonia & Zugravu, Natalia, 2012. "Environmental regulation and French firms location abroad: An economic geography model in an international comparative study," Ecological Economics, Elsevier, vol. 77(C), pages 48-61.
    9. Daniel L. Millimet & Jayjit Roy, 2016. "Empirical Tests of the Pollution Haven Hypothesis When Environmental Regulation is Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(4), pages 652-677, June.
    10. Christer Ljungwall & Martin Linde-Rahr, 2005. "Environmental Policy and the Location of Foreign Direct Investment in China," Governance Working Papers 22020, East Asian Bureau of Economic Research.
    11. Beladi, Hamid & Chao, Chi-Chur & Frasca, Ralph, 1999. "Foreign investment and environmental regulations in LDCs," Resource and Energy Economics, Elsevier, vol. 21(2), pages 191-199, May.
    12. Shadbegian, Ronald J. & Gray, Wayne B., 2005. "Pollution abatement expenditures and plant-level productivity: A production function approach," Ecological Economics, Elsevier, vol. 54(2-3), pages 196-208, August.
    13. Sun, Qian & Tong, Wilson & Yu, Qiao, 2002. "Determinants of foreign direct investment across China," Journal of International Money and Finance, Elsevier, vol. 21(1), pages 79-113, February.
    14. List, John A. & Co, Catherine Y., 2000. "The Effects of Environmental Regulations on Foreign Direct Investment," Journal of Environmental Economics and Management, Elsevier, vol. 40(1), pages 1-20, July.
    15. Rahel Aichele & Gabriel Felbermayr, 2015. "Kyoto and Carbon Leakage: An Empirical Analysis of the Carbon Content of Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 104-115, March.
    16. Charles Dufour & Paul Lanoie & Michel Patry, 1995. "Regulation and Productivity in the Quebec Manufacturing Sector," CIRANO Working Papers 95s-12, CIRANO.
    17. Judith M. Dean & Mary E. Lovely & Hua Wang, 2017. "Are foreign investors attracted to weak environmental regulations? Evaluating the evidence from China," World Scientific Book Chapters, in: Mary E Lovely (ed.), International Economic Integration and Domestic Performance, chapter 9, pages 155-167, World Scientific Publishing Co. Pte. Ltd..
    18. Robert Elliott & Ying Zhou, 2013. "Environmental Regulation Induced Foreign Direct Investment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 55(1), pages 141-158, May.
    19. McGuire, Martin C., 1982. "Regulation, factor rewards, and international trade," Journal of Public Economics, Elsevier, vol. 17(3), pages 335-354, April.
    20. Rema Hanna, 2010. "US Environmental Regulation and FDI: Evidence from a Panel of US-Based Multinational Firms," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 158-189, July.
    21. Ulrich Wagner & Christopher Timmins, 2009. "Agglomeration Effects in Foreign Direct Investment and the Pollution Haven Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 43(2), pages 231-256, June.
    22. Abay Mulatu, 2017. "The Structure of UK Outbound FDI and Environmental Regulation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(1), pages 65-96, September.
    23. Naughton, Helen T., 2014. "To shut down or to shift: Multinationals and environmental regulation," Ecological Economics, Elsevier, vol. 102(C), pages 113-117.
    24. Ki-Dong Lee & Woohyung Lee & Kichun Kang, 2014. "Pollution Haven with Technological Externalities Arising from Foreign Direct Investment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(1), pages 1-18, January.
    25. Fredriksson, Per G. & List, John A. & Millimet, Daniel L., 2003. "Bureaucratic corruption, environmental policy and inbound US FDI: theory and evidence," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1407-1430, August.
    26. Yuquing Xing & Charles Kolstad, 2002. "Do Lax Environmental Regulations Attract Foreign Investment?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(1), pages 1-22, January.
    27. John A. List & W. Warren McHone & Daniel L. Millimet, 2003. "Effects of air quality regulation on the destination choice of relocating plants," Oxford Economic Papers, Oxford University Press, vol. 55(4), pages 657-678, October.
    28. Roberto A. De Santis & Frank Stähler, 2009. "Foreign Direct Investment and Environmental Taxes," German Economic Review, Verein für Socialpolitik, vol. 10(1), pages 115-135, February.
    29. Di, Wenhua, 2007. "Pollution abatement cost savings and FDI inflows to polluting sectors in China," Environment and Development Economics, Cambridge University Press, vol. 12(6), pages 775-798, December.
    30. Celik, Sule & Orbay, Benan Zeki, 2011. "Location choice under trade and environmental policies," Economic Modelling, Elsevier, vol. 28(4), pages 1710-1715, July.
    31. Fell, Harrison & Maniloff, Peter, 2018. "Leakage in regional environmental policy: The case of the regional greenhouse gas initiative," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 1-23.
    32. Leiter, Andrea M. & Parolini, Arno & Winner, Hannes, 2011. "Environmental regulation and investment: Evidence from European industry data," Ecological Economics, Elsevier, vol. 70(4), pages 759-770, February.
    33. Walter, Ingo, 1978. "Environmental attitudes in less developed countries," Resources Policy, Elsevier, vol. 4(3), pages 200-204, September.
    34. Levinson, Arik, 1996. "Environmental regulations and manufacturers' location choices: Evidence from the Census of Manufactures," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 5-29, October.
    35. Jing Lan & Makoto Kakinaka & Xianguo Huang, 2012. "Foreign Direct Investment, Human Capital and Environmental Pollution in China," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(2), pages 255-275, February.
    36. Dam, Lammertjan & Scholtens, Bert, 2012. "The curse of the haven: The impact of multinational enterprise on environmental regulation," Ecological Economics, Elsevier, vol. 78(C), pages 148-156.
    37. Roberto A. De Santis & Frank Stähler, 2009. "Foreign Direct Investment and Environmental Taxes," German Economic Review, Verein für Socialpolitik, vol. 10(1), pages 115-135, February.
    38. Huang, Jianhuan & Chen, Xudong & Huang, Bihong & Yang, Xiaoguang, 2017. "Economic and environmental impacts of foreign direct investment in China: A spatial spillover analysis," China Economic Review, Elsevier, vol. 45(C), pages 289-309.
    39. Andreas Waldkirch & Munisamy Gopinath, 2008. "Pollution Control and Foreign Direct Investment in Mexico: An Industry-Level Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(3), pages 289-313, November.
    40. Chung, Sunghoon, 2014. "Environmental regulation and foreign direct investment: Evidence from South Korea," Journal of Development Economics, Elsevier, vol. 108(C), pages 222-236.
    41. James A. Tobey, 1990. "The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test," Kyklos, Wiley Blackwell, vol. 43(2), pages 191-209, May.
    42. Kellenberg, Derek K., 2009. "An empirical investigation of the pollution haven effect with strategic environment and trade policy," Journal of International Economics, Elsevier, vol. 78(2), pages 242-255, July.
    43. Wu, Haoyi & Guo, Huanxiu & Zhang, Bing & Bu, Maoliang, 2017. "Westward movement of new polluting firms in China: Pollution reduction mandates and location choice," Journal of Comparative Economics, Elsevier, vol. 45(1), pages 119-138.
    44. Myeong Hwan Kim & Nodir Adilov, 2012. "The lesser of two evils: an empirical investigation of foreign direct investment-pollution tradeoff," Applied Economics, Taylor & Francis Journals, vol. 44(20), pages 2597-2606, July.
    45. Ronald McQuaid & Scott Leitham & John Nelson, 1996. "Accessibility and Location Decisions in a Peripheral Region of Europe: A Logit Analysis," Regional Studies, Taylor & Francis Journals, vol. 30(6), pages 579-588.
    46. Brunnermeier, Smita B. & Cohen, Mark A., 2003. "Determinants of environmental innovation in US manufacturing industries," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 278-293, March.
    47. Matthew A. Cole & Robert J. R. Elliott, 2005. "FDI and the Capital Intensity of “Dirty” Sectors: A Missing Piece of the Pollution Haven Puzzle," Review of Development Economics, Wiley Blackwell, vol. 9(4), pages 530-548, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jose Martino Neto & Valerio Antonio Pamplona Salomon & Miguel Angel Ortiz-Barrios & Antonella Petrillo, 2023. "Compatibility and correlation of multi-attribute decision making: a case of industrial relocation," Annals of Operations Research, Springer, vol. 326(2), pages 831-852, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sylwia Bialek & Alfons J. Weichenrieder, 2021. "Do Stringent Environmental Policies Deter FDI? M&A versus Greenfield," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(3), pages 603-636, November.
    2. Liu, Wei & Zhao, Zhihui & Wen, Zhao & Cheng, Shixiong, 2022. "Environmental regulation and OFDI: Evidence from Chinese listed firms," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 191-208.
    3. Grégoire Garsous & Tomasz Kozluk, 2017. "Foreign Direct Investment and The Pollution Haven Hypothesis: Evidence from Listed Firms," OECD Economics Department Working Papers 1379, OECD Publishing.
    4. Imad Moosa, 2019. "The Environmental Effects of FDI: Evidence from MENA Countries," Working Papers 1321, Economic Research Forum, revised 21 Aug 2019.
    5. Saussay, Aurélien & Zugravu-Soilita, Natalia, 2023. "International production chains and the pollution offshoring hypothesis: An empirical investigation," Resource and Energy Economics, Elsevier, vol. 73(C).
    6. Antoine Dechezleprêtre & Misato Sato, 2017. "The Impacts of Environmental Regulations on Competitiveness," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 11(2), pages 183-206.
    7. Edward Manderson & Richard Kneller, 2012. "Environmental Regulations, Outward FDI and Heterogeneous Firms: Are Countries Used as Pollution Havens?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(3), pages 317-352, March.
    8. Natalia Zugravu-Soilita, 2017. "How does Foreign Direct Investment Affect Pollution? Toward a Better Understanding of the Direct and Conditional Effects," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(2), pages 293-338, February.
    9. Zhonghua Cheng & Lianshui Li & Jun Liu, 2018. "The spatial correlation and interaction between environmental regulation and foreign direct investment," Journal of Regulatory Economics, Springer, vol. 54(2), pages 124-146, October.
    10. Wen Jun & Muhammad Zakaria & Syed Jawad Hussain Shahzad & Hamid Mahmood, 2018. "Effect of FDI on Pollution in China: New Insights Based on Wavelet Approach," Sustainability, MDPI, vol. 10(11), pages 1-20, October.
    11. José-Antonio Monteiro & Madina Kukenova, 2008. "Does Lax Environmental Regulation Attract FDI When Accounting For "Third-Country" Effects?," IRENE Working Papers 08-01, IRENE Institute of Economic Research.
    12. Assad Ullah & Xinshun Zhao & Muhammad Abdul Kamal & Jiajia Zheng, 2022. "Environmental regulations and inward FDI in China: Fresh evidence from the asymmetric autoregressive distributed lag approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1340-1356, January.
    13. Abay Mulatu, 2017. "The Structure of UK Outbound FDI and Environmental Regulation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(1), pages 65-96, September.
    14. Jensen, Camilla & Mina, Andrea, 2019. "Did transition bring cleaner air? Effects of ownership, territorial and technology policy on air pollution," Ecological Economics, Elsevier, vol. 165(C), pages 1-1.
    15. Yanyun Li & Faqin Lin & Wenxiao Wang, 2022. "Environmental regulation and inward foreign direct investment: Evidence from the eleventh Five‐Year Plan in China," Journal of Economic Surveys, Wiley Blackwell, vol. 36(3), pages 684-707, July.
    16. Lorena D’Agostino, 2015. "How MNEs respond to environmental regulation: integrating the Porter hypothesis and the pollution haven hypothesis," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 32(2), pages 245-269, August.
    17. Jitao Tang, 2015. "Testing the Pollution Haven Effect: Does the Type of FDI Matter?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(4), pages 549-578, April.
    18. Shi, Xinzheng & Xu, Zhufeng, 2018. "Environmental regulation and firm exports: Evidence from the eleventh Five-Year Plan in China," Journal of Environmental Economics and Management, Elsevier, vol. 89(C), pages 187-200.
    19. Wu, Haoyi & Guo, Huanxiu & Zhang, Bing & Bu, Maoliang, 2017. "Westward movement of new polluting firms in China: Pollution reduction mandates and location choice," Journal of Comparative Economics, Elsevier, vol. 45(1), pages 119-138.
    20. Yuqing Ge & Yucai Hu & Shenggang Ren, 2020. "Environmental Regulation and Foreign Direct Investment: Evidence from China’s Eleventh and Twelfth Five-Year Plans," Sustainability, MDPI, vol. 12(6), pages 1-18, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:endesu:v:22:y:2020:i:5:d:10.1007_s10668-019-00403-7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.