Is There a Pollution Haven Effect? Evidence from a Natural Experiment in China
AbstractIn this paper, we investigate whether there is a pollution haven effect, specifically, the effect of environmental regulations on firm location. Our identification uses the Two Control Zones (TCZ) policy implemented by the Chinese government in 1998. The difference-in-differences (DID) estimation shows that cities with tougher environmental regulations attract less foreign direct investment (FDI). Specifically, being listed as a TCZ city causes the amount of FDI to drop by 41%. Our results are robust to various robustness checks on the validity of the DID estimation and other estimation concerns.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 38787.
Date of creation: May 2012
Date of revision:
Pollution haven effect; Difference-in-differences estimation; Two control zones; Natural experiment;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-22 (All new papers)
- NEP-ENE-2012-05-22 (Energy Economics)
- NEP-ENV-2012-05-22 (Environmental Economics)
- NEP-RES-2012-05-22 (Resource Economics)
- NEP-TRA-2012-05-22 (Transition Economics)
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