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Emission Reduction and Foreign Direct Investment Nexus in China

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  • Yuan Xu

    (Nanjing University of Economics and Finance)

  • Yanrui Wu

    (Business School, The University of Western Australia)

  • Yongli Shi

    (Nanjing University of Economics and Finance)

Abstract

This paper employs a difference-in-difference-in-difference approach to examine the emission reduction and foreign direct investment nexus in China. It combines a firm-level dataset with emission reduction target statistics at city-level. The findings indicate that stringent environmental regulation is associated with the fall of the output of foreign firms in general and the shrinking of pollution-intensive industries in cities with heavy emission reduction pressure in particular. It is also shown that the location choice of foreign investment changes as emission reduction targets at city-level vary. Finally it is found that environmental regulation helps improve the structure of foreign direct investment and hence contributes to industrial upgrading in the economy.

Suggested Citation

  • Yuan Xu & Yanrui Wu & Yongli Shi, 2021. "Emission Reduction and Foreign Direct Investment Nexus in China," Economics Discussion / Working Papers 21-07, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:21-07
    Note: MD5 = 027a445dd09b6f372af76b1b7de2ba9a
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    2. Iulia ELENES PLATONA, 2022. "The Economic Freedom, Country Risk And Foreign Direct Investments," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 2(2), pages 206-212, December.
    3. Bai, Hanyu & Irfan, Muhammad & Hao, Yu, 2022. "How does industrial transfer affect environmental quality? Evidence from China," Journal of Asian Economics, Elsevier, vol. 82(C).
    4. Deng, Qiu Shi & Alvarado, Rafael & Cuesta, Lizeth & Tillaguango, Brayan & Murshed, Muntasir & Rehman, Abdul & Işık, Cem & López-Sánchez, Michelle, 2022. "Asymmetric impacts of foreign direct investment inflows, financial development, and social globalization on environmental pollution," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 236-251.

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    Keywords

    Emission reduction; foreign direct investment; environmental regulation; DDD method; China;
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