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Preventing pollution havens? Environmental Provisions in Preferential Trade Agreements and Foreign Direct Investment

Author

Listed:
  • Clara Brandi

    (German Institute of Development and Sustainability)

  • Federico Carri-Caccia

    (Department of International and Spanish Economics, University of Granada)

Abstract

The present paper re-visits the link between cross-border mergers and acquisitions (M&As) and bilateral trade liberalization. It presents new evidence on the extent to which investment related environmental provisions (IEP) embedded in Preferential Trade Agreements (PTAs) moderate the impact of PTAs on cross-border M&As. To this end, we estimate a gravity model. Our findings suggest that IEPs diminish the positive effect of PTAs on bilateral M&As. We show that IEP undermines the positive effect of PTAs on investments flows between countries with high environmental stringency.

Suggested Citation

  • Clara Brandi & Federico Carri-Caccia, 2025. "Preventing pollution havens? Environmental Provisions in Preferential Trade Agreements and Foreign Direct Investment," Working Papers 202513, Center for Global Policy Analysis, LeBow College of Business, Drexel University.
    • Handle: RePEc:drx:wpaper:202513
    as

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    File URL: https://www.lebow.drexel.edu/sites/default/files/2025-04/202513-cgpa-preventing-pollution-havens.pdf
    File Function: First version, 2025
    Download Restriction: no
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    More about this item

    Keywords

    Gravity; M&As; Pollution haven; PTA;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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