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US Environmental Regulation and FDI: Evidence from a Panel of US-Based Multinational Firms

  • Rema Hanna

This paper measures the response of US-based multinationals to the Clean Air Act Amendments (CAAA). Using a panel of firm-level data over the period 1966-1999, I estimate the effect of regulation on a multinational's foreign production decisions. The CAAA induced substantial variation in the degree of regulation faced by firms, allowing for the estimation of econometric models that control for firm-specific characteristics and industrial trends. I find that the CAAA caused regulated multinational firms to increase their foreign assets by 5.3 percent and their foreign output by 9 percent. Heavily regulated firms did not disproportionately increase foreign investment in developing countries. (JEL F23, K32, L51, Q52, Q53, Q58)

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Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

Volume (Year): 2 (2010)
Issue (Month): 3 (July)
Pages: 158-89

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Handle: RePEc:aea:aejapp:v:2:y:2010:i:3:p:158-89
Note: DOI: 10.1257/app.2.3.158
Contact details of provider: Web page: https://www.aeaweb.org/aej-applied
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