Keller and Levinson (2002, this Review, 84(4), 691-703) utilize state-level panel data on inflows of foreign direct investment along with an innovative measure of relative pollution abatement costs to assess the impact of environmental stringency on capital flows. Using standard parametric panel data models, the authors find moderate evidence that capital flows are sensitive to abatement costs. Using recently developed nonparametric methods, we assess the robustness of this conclusion. The nonparametric approach reveals that (i) some of the parametric results are not robust, (ii) the impact of relative abatement costs is heterogeneous across states and generally of smaller magnitude than previously suggested.Length: 15 pages
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Paper provided by Southern Methodist University, Department of Economics in its series Departmental Working Papers with number
0507.
Find related papers by JEL classification: C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
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