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The pollution haven hypothesis : a geographic economy model in a comparative study

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Abstract

Although based on theoretical foundations, the pollution haven hypothesis stating that heterogenous environmental regulations between countries influence multinational firms' location decisions, has never been clearly proven empirically. In this study, we reexamine this hypothesis by a fresh take on both its theoretical and empirical aspects. While applying a geographic economy model on French firm-level data, we confirm the pollution haven hypothesis for a global sample. Through sensitivity analysis, we validate it for Central and Eastern European countries, emerging and high-income OECD countries, but not for the major part of the Commonwealth of Independent States countries. Finally, we show that the pollution haven hypothesis is confirmed in the strongest manner for emerging economies.

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Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number v08083.

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Length: 31 pages
Date of creation: Apr 2008
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Handle: RePEc:mse:cesdoc:v08083

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Keywords: FDI; environmental regulation; economic geography; pollution haven hypothesis.;

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Cited by:
  1. John Feddersen, 2012. "Why we can't confirm the pollution haven hypothesis: A model of carbon leakage with agglomeration," Economics Series Working Papers 613, University of Oxford, Department of Economics.
  2. Efthymia Kyriakopoulou & Anastasios Xepapadeas, . "Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations," DEOS Working Papers 1018, Athens University of Economics and Business.
  3. Martin F. Quaas & Sjak Smulders, 2008. "Pollution and the Efficiency of Urban Growth," Working Papers 2008.75, Fondazione Eni Enrico Mattei.

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