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Do stringent environmental policies deter FDI? M&A versus Greenfi eld

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  • Bialek, Sylwia
  • Weichenrieder, Alfons J.

Abstract

This study examines how environmental stringency affects the location decision of foreign direct investments. We analyze a fi rm-level data set on German outbound FDI and innovate on previous studies by controlling for the mode of entry and applying a mixed-logit analysis. The results show that Greenfi eld projects react to environmental regulation in a strongly different way than M&As. We fi nd robust support for pollution haven hypothesis for polluting Green fields. M&A investments in low polluting industries, on the other hand, seem to be attracted by stricter environmental regulation. We introduce a novel instrumental variable for environmental stringency and apply it to verify the results.

Suggested Citation

  • Bialek, Sylwia & Weichenrieder, Alfons J., 2015. "Do stringent environmental policies deter FDI? M&A versus Greenfi eld," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113179, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc15:113179
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    Cited by:

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    2. Hille, Erik & Shahbaz, Muhammad & Moosa, Imad, 2019. "The impact of FDI on regional air pollution in the Republic of Korea: A way ahead to achieve the green growth strategy?," Energy Economics, Elsevier, vol. 81(C), pages 308-326.
    3. Sylwia Bialek & Alfons J. Weichenrieder, 2016. "Environmental Regulation and Foreign Direct Investment: The Role of Mode of Entry," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(04), pages 41-47, February.

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    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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