One of the most contentious debates today is whether pollution-intensive industries seek locations with weak environmental standards, turning these locations into 'pollution havens." Empirical studies to date show little evidence to support the pollution haven hypothesis, but suffer potentially from omitted variable bias, specification, and measurement errors. This paper estimates the strength of pollution-haven behavior by examining the location choices of equity joint venture (EJV) projects in China. We derive a location choice model from a theoretical framework that incorporates the firm's production and abatement decision, agglomeration and factor abundance. We estimate conditional logit and nested multinomial logit models using new data sets containing information on a sample of EJV projects, effective environmental levies on water pollution, and estimates of Chinese emissions and abatement costs for 3-digit ISIC industries. Results from 2886 manufacturing joint venture projects during 1993-1996 show EJVs from all source countries go into provinces with high concentrations of foreign investment, relatively abundant stocks of skilled workers, concentrations of foreign firms, and special incentives. Environmental stringency does affect location choice, but not in the manner described by the pollution haven hypothesis. Relatively weak environmental levies are a significant attraction for joint ventures with partners from Hong Kong, Macao, Taiwan, and other Southeast Asian developing countries. In contrast, joint ventures with partners from industrial country sources (e.g., US, UK and Japan) are actually attracted by stringent environmental levies, regardless of the pollution intensity of the industry. We discuss the likely role of technological differences in explaining these results.
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Paper provided by United States International Trade Commission, Office of Economics in its series Working Papers with number
15854.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Josh Ederington & Arik Levinson & Jenny Minier, 2003.
"Footloose and Pollution-Free,"
NBER Working Papers
9718, National Bureau of Economic Research, Inc.
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Josh Ederington, Arik Levinson & Jenny Minier, .
"Footlose and Pollution Free,"
Working Papers
gueconwpa~03-03-04, Georgetown University, Department of Economics.
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)