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A new look at the pollution halo hypothesis: The role of environmental policy stringency

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  • Hale Akbulut
  • Ahmet Burçin Yereli

Abstract

The effect of Foreign Direct Investments (FDIs) on greenhouse gas (GHG) emissions, has attracted the attention of researchers in recent years. However, the indirect effects of environmental policies in the process were not sufficiently considered. This study uses a panel threshold methodology to examine the non-linear impact of environmental policy stringency on the relationship between FDIs and GHG emissions in 25 OECD countries. Our results show a negative relationship between FDIs and GHG emissions if the countries have environ-mental policy stringency index above a threshold level of (2.22). The results are also supported by the fixed effects model, which indicates a threshold effect of (2.88). The threshold effect is mostly due to the stringency of nonmarket-based environmental policies.

Suggested Citation

  • Hale Akbulut & Ahmet Burçin Yereli, 2023. "A new look at the pollution halo hypothesis: The role of environmental policy stringency," Estudios de Economia, University of Chile, Department of Economics, vol. 50(1 Year 20), pages 31-54, June.
    • Handle: RePEc:udc:esteco:v:50:y:2023:i:1:p:31-54
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    File URL: https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/70870/73184
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    More about this item

    Keywords

    Climate change; environmental taxes; public policy.;
    All these keywords.

    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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