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Strategic Environmental Policies in the Presence of Foreign Direct Investment

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  • M. Kayalica

  • Sajal Lahiri

Abstract

We analyze strategic environmental standards in the presence of foreign direct investment. A number of foreign firms located in a host country compete with a domestic firm in another country to export a homogeneous good to a third country. When the number of foreign firms is exogenous, the host country applies a stricter environmental regulation than the other producing country. However, under free entry and exit of foreign firms, the host country may apply a less severe standard under both non-cooperative and cooperative equilibrium. We also find that the nature market structure does not affect the equilibrium values of total pollution if export subsidies are also used. Copyright Springer 2005

Suggested Citation

  • M. Kayalica & Sajal Lahiri, 2005. "Strategic Environmental Policies in the Presence of Foreign Direct Investment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 30(1), pages 1-21, January.
    • Handle: RePEc:kap:enreec:v:30:y:2005:i:1:p:1-21
    DOI: 10.1007/s10640-004-0757-3
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    References listed on IDEAS

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    1. Wayne B. Gray, 1997. "Manufacturing Plant Location: Does State Pollution Regulation Matter?," NBER Working Papers 5880, National Bureau of Economic Research, Inc.
    2. repec:esx:essedp:506 is not listed on IDEAS
    3. Lahiri, Sajal & Ono, Yoshiyasu, 2000. "Protecting the environment in the presence of foreign direct investment: tax versus quantity restriction," Economics Discussion Papers 9985, University of Essex, Department of Economics.
    4. Martin D. D. Evans & Richard K. Lyons, 2017. "Are Different-Currency Assets Imperfect Substitutes?," World Scientific Book Chapters, in: Studies in Foreign Exchange Economics, chapter 10, pages 415-456, World Scientific Publishing Co. Pte. Ltd..
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