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Foreign Direct Investment and Pollution Havens

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  • John King

Abstract

It has been often argued that pollution-intensive industries locate in places with weak environmental standards, turning these locations into “pollution havens”. The present paper tests the pollution haven hypothesis employing a matched data on foreign direct investment flows and environmental stringency for Eastern Europe. Exploiting the panel data properties we are able to address omitted variable bias, specification, and measurement errors, which weaken many empirical studies. Our results suggest that environmental stringency indeed affects location choice in Eastern Europe. However, weak environmental levies are a significant attraction for foreign direct investment only from developing and transition countries.

Suggested Citation

  • John King, 2011. "Foreign Direct Investment and Pollution Havens," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 54(1), pages 39-47.
  • Handle: RePEc:eei:journl:v:54:y:2011:i:1:p:39-47
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    Cited by:

    1. Dirk Engel & Christoph M. Schmidt & Vivien Procher, 2010. "The Asymmetries of a Small World: Entry Into and Withdrawal From International Markets by French Firms," Ruhr Economic Papers 0192, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    2. Takacs, Istvan & Liebmann, Lajos, 2011. "Role of Foreign Direct Investment in Restructuring of Agribusiness in the CEE Countries Following the Transition," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 116339, European Association of Agricultural Economists.
    3. James Anderson, 2001. "Migration, FDI, and the Margins of Trade," EERI Research Paper Series EERI_RP_2001_05, Economics and Econometrics Research Institute (EERI), Brussels.
    4. Patrick Hamm & Lawrence King, 2010. "Post-Manichean Economics: Foreign Investment, State Capacity and Economic Development in Transition Economies," Working Papers wp227, Political Economy Research Institute, University of Massachusetts at Amherst.
    5. Engel, Dirk & Procher, Vivien & Schmidt, Christoph M., 2010. "The Asymmetries of a Small World: Entry Into and Withdrawal From International Markets by French Firms," Ruhr Economic Papers 192, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    6. Altshuler, Rosanne & Fulghieri, Paolo, 1994. "Incentive Effects of Foreign Tax Credits on Multinational Corporations," National Tax Journal, National Tax Association, vol. 47(2), pages 349-61, June.
    7. Patrick Hamm & David Stuckler & Lawrence King, 2010. "The Governance Grenade: Mass Privatization, State Capacity and Economic Growth in Post-communist Countries," Working Papers wp222, Political Economy Research Institute, University of Massachusetts at Amherst.
    8. Yanqing Jiang, 2014. "Spatial Strategic Interaction In Environmental Protection: An Empirical Study Of The Chinese Provinces," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 26(3), pages 203-216, November.
    9. Shu-Chen Chang, 2015. "Threshold effect of foreign direct investment on environmental degradation," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 14(1), pages 75-102, December.
    10. Bandelj, Nina, 2006. "Cultural Understandings of Economic Globalization: Discourse on Foreign Direct Investment in Slovenia," MPIfG Discussion Paper 06/1, Max Planck Institute for the Study of Societies.
    11. repec:ksp:journ2:v:4:y:2017:i:1:p:19-54 is not listed on IDEAS
    12. Ari Kokko & Victoria Kravtsova, 2012. "Regional Characteristics And Effects Of Inward Fdi: The Case Of Ukraine," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 3(2).
    13. repec:zbw:rwirep:0192 is not listed on IDEAS
    14. Hakimi, Abdelaziz & Hamdi, Helmi, 2015. "How Corruption affect Growth in MENA region? Fresh Evidence from a Panel Cointegration Analysis," MPRA Paper 63750, University Library of Munich, Germany.
    15. Lawrence P. King, 2003. "Explaining Postcommunist Economic Performance," William Davidson Institute Working Papers Series 2003-559, William Davidson Institute at the University of Michigan.

    More about this item

    Keywords

    FDI; Environmental Economics and Policy; Environmental Stringency; International Relations; Trade; Pollution Haven Hypothesis.;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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