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A Panel Study of the Pollution-Haven Hypothesis

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  • MacDermott Raymond

    () (Virginia Military Institute)

Abstract

This paper tests the pollution-haven hypothesis. A fixed-effects variation of the gravity model is applied to panel data to investigate what relationship, if any, exists between environmental regulations and FDI. The data set focuses on bilateral flows of aggregated foreign direct investment between 26 OECD countries from 1982 to 1997. Use of pollution emissions as a proxy for environmental stringency shows evidence in support of the pollution-haven hypothesis. In other words, firms do seek out countries with weaker environmental regulations for production. In addition, FDI appears to fall with distance. Contrary to expectations, FDI is not influenced by interest rates, wages or GDP.

Suggested Citation

  • MacDermott Raymond, 2009. "A Panel Study of the Pollution-Haven Hypothesis," Global Economy Journal, De Gruyter, vol. 9(1), pages 1-14, March.
  • Handle: RePEc:bpj:glecon:v:9:y:2009:i:1:n:2
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    Cited by:

    1. John McCollough & Miao He & Arzu Tay Bayramoglu, 2016. "Pollution Havens and Their Relationship to the Environmental Kuznets Curve: The Case of the us Tyre Industry," Economic Affairs, Wiley Blackwell, vol. 36(3), pages 258-272, October.

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