A Panel Study of the Pollution-Haven Hypothesis

2009 ◽  
Vol 9 (1) ◽  
pp. 1850154 ◽  
Author(s):  
Raymond MacDermott
Keyword(s):  
Foreign Direct Investment ◽  
Interest Rates ◽  
Direct Investment ◽  
Fixed Effects ◽  
Environmental Regulations ◽  
Panel Study ◽  
Pollution Haven Hypothesis ◽  
Data Set ◽  
Pollution Haven ◽  
Pollution Emissions

This paper tests the pollution-haven hypothesis. A fixed-effects variation of the gravity model is applied to panel data to investigate what relationship, if any, exists between environmental regulations and FDI. The data set focuses on bilateral flows of aggregated foreign direct investment between 26 OECD countries from 1982 to 1997. Use of pollution emissions as a proxy for environmental stringency shows evidence in support of the pollution-haven hypothesis. In other words, firms do seek out countries with weaker environmental regulations for production. In addition, FDI appears to fall with distance. Contrary to expectations, FDI is not influenced by interest rates, wages or GDP.

A meta-analysis of FDI and environmental regulations

2014 ◽  
Vol 20 (2) ◽  
pp. 185-208 ◽  
Author(s):  
Alief A. Rezza
Keyword(s):  
Developing Countries ◽  
Foreign Direct Investment ◽  
Research Design ◽  
Government Spending ◽  
Direct Investment ◽  
Environmental Regulations ◽  
Meta Analysis ◽  
Data Sets ◽  
Pollution Haven Hypothesis ◽  
Pollution Haven

AbstractPrevious authors have been unable to agree on whether environmental regulations hinder foreign direct investment (FDI). The empirical evidence in this domain remains inconclusive because of the contrasting results observed in the literature, owing to the differing characteristics of the data sets and models used in previous studies. The present study carries out a meta-analysis on a sample of published and unpublished papers on the so-called pollution haven hypothesis (PHH) in order to investigate whether certain aspects of research design affect the presented findings. The paper offers explanations for the mixed findings reported in the literature by suggesting that certain aspects of research design are crucial to explaining their significance. The PHH is more likely to be supported by studies that define FDI as the establishment of new plants and those that use government spending as a proxy for the strictness of environmental regulations. Moreover, focusing investigations on pollution-intensive industries or developing countries hardly increases the likelihood of achieving results that support the PHH.

scholarly journals Does Environmental Governance Matter for Foreign Direct Investment? Testing the Pollution Haven Hypothesis for Indian States

2018 ◽  
Vol 35 (1) ◽  
pp. 81-107 ◽  
Author(s):  
Vinish Kathuria
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Environmental Governance ◽  
Pollution Abatement ◽  
The State ◽  
Foreign Firms ◽  
Pollution Haven Hypothesis ◽  
Indian States ◽  
Industrial Composition ◽  
Pollution Haven

This paper attempts to examine the role of environmental governance on foreign direct investment by testing the pollution haven hypothesis for 21 Indian states for the period 2002–2010. To test for the hypothesis, this study computes an abatement expenditure index adjusted for industrial composition at the state level using Annual Survey of Industries plant-level data. The methodology used is based on that proposed by Levinson ( 2001 ). The index compares actual pollution abatement expenditures in a particular state, unadjusted for industrial composition, to predicted abatement expenditures in the same state. (The predictions are based on nationwide abatement expenditures by industry and each state's industrial composition.) If the adjusted index is low for a state, it implies that the state has poor environmental governance, which would be expected to induce foreign firms to invest. However, the results do not find any evidence of the pollution haven hypothesis in the Indian context. Other infrastructure and market-access-related variables are more important in influencing a foreign firm's investment decisions than environmental stringency.

scholarly journals Panel Data Analysis on the Influence of Environmental Regulations on the Inflow of Foreign Direct Investment in China

2020 ◽  
Vol 15 (7) ◽  
pp. 1035-1044
Author(s):  
Hao Hu ◽  
Lei Dong ◽  
Hao Zhang ◽  
Haiyan Tang ◽  
Desheng Yin
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Fixed Effects ◽  
Environmental Regulations ◽  
Panel Data Analysis ◽  
Entropy Method ◽  
Eastern Region ◽  
Fixed Effects Model ◽  
Location Selection ◽  
Investment In China

From the micro level, this paper thoroughly investigates the influence of environmental regulations (ERS) on the inflow of foreign direct investment (FDI) in China. Firstly, the entropy method was adopted to comprehensively measure the ERS intensities of 283 Chinese cities at prefecture level and above in 2003-2016. Then, the Cournot model was utilized to analyze how ERS affects FDI. After that, fixed-effects model was employed to empirically examine the impacts of ERS intensities in eastern, central, and western regions on FDI inflow. The results show that: The regression results on nationwide, central, and western samples indicate that the influence of ERS variable was significantly negative. This means ERS is indeed an important consideration of foreign investors in location selection. Besides, stricter ERS hinders the inflow of FDI, which agrees with the pollution haven hypothesis. On eastern samples, stricter ERS promotes FDI inflow, that is, the situation in eastern region meets Porter hypothesis. Finally, several suggestions were presented for policymakers based on the empirical results.

Trade Agreements and the Environment: An Industry Level Study for NAFTA

2006 ◽  
Vol 6 (3) ◽  
pp. 1850090 ◽  
Author(s):  
Raymond MacDermott
Keyword(s):  
Political Process ◽  
Trade Agreements ◽  
Pollution Haven Hypothesis ◽  
Data Set ◽  
Industry Level ◽  
Pollution Haven ◽  
Test Equation ◽  
Pollution Haven Effect ◽  
Pollution Emissions ◽  
Unites States

The aim of this paper is to explore two apparently unrelated issues – regional trade agreements and the pollution-haven hypothesis. They are linked by the belief that the elimination of trade barriers will further encourage firms already considering a move to countries with weak environmental regulations. Given the proliferation of trade agreements, as well as the movement of environmental issues to the forefront of our political process, a better understanding of the policy effects is needed. We apply a test equation loosely based on the gravity model to a data set of industry-level foreign direct investment from the Unites States to 23 partner countries from 1982 to 1999. Using pollution emissions as a proxy for environmental stringency, we find strong evidence in support of the pollution-haven hypothesis. We also find the NAFTA increase outflows of U.S. FDI. Finally, the NAFTA appears to encourage the pollution-haven effect.

The Impact of Foreign Direct Investment on CO2 Emission

2017 ◽  
pp. 81-92 ◽  
Author(s):  
Oguzhan Aydemir ◽  
Feyyaz Zeren
Keyword(s):  
Foreign Direct Investment ◽  
Co2 Emissions ◽  
Direct Investment ◽  
Panel Data Analysis ◽  
Panel Cointegration ◽  
Pollution Haven Hypothesis ◽  
Pollution Haven ◽  
Carbon Dioxide Co2 ◽  
The Impact ◽  
Pollution Halo Hypothesis

In the literature, the impact of Foreign Direct Investment (FDI) on carbon dioxide (CO2) emissions is explained by two different hypotheses: Pollution Halo and Pollution Haven Hypothesis. While Pollution Halo hypothesis states that FDI provides advanced technology to countries and accordingly decreases CO2 emissions, Pollution Haven Hypothesis indicates that there is a positive relationship between FDI and CO2. In this regard, in this study, the impact of FDI on CO2 emissions in the selected 10 of G-20 countries in the period of 1970-2010 is investigated by using panel data analysis. The empirical findings show that panels have cross-section dependence and these two panels are stationary in different levels. Moreover, the existence of long term relationship between panels is found by using Durbin Hausmann panel cointegration test. The results of the study also show that while Pollution Halo Hypothesis is valid for USA, France and Argentina, Pollution Haven Hypothesis is valid for UK, Canada, Australia, South Africa, Italy, Mexico and Saudi Arabia.

scholarly journals Role of human capital and foreign direct investment in promoting economic growth

2015 ◽  
Vol 42 (2) ◽  
pp. 98-111 ◽  
Author(s):  
Muhammad Azam ◽  
Ather Maqsood Ahmed
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Foreign Direct Investment ◽  
Random Effects ◽  
Direct Investment ◽  
Fixed Effects ◽  
Set Covering ◽  
Data Set ◽  
Content Type ◽  
Education And Health

Purpose – The purpose of this paper is to validate the Endogenous Growth Model by examining the impacts of Human Capital (HK) and Foreign Direct Investment (FDI) on economic growth in ten countries from Commonwealth of Independent States (CIS). Design/methodology/approach – For empirical investigation, a linear regression model based on growth theory and panel data set covering the time-period from 1993 to 2011 are used. Fixed and random effects models are applied. On the basis of the Hausman test, the fixed effects model has been preferred over the random effects model. Findings – The results support the hypothesis of the study by confirming that HK development is critical for economic growth. Similarly, FDI has been found to have a facilitating role in promoting growth in the former Soviet Republics now comprising Central Asian independent economies. This is despite of the fact that there are country-specific differences across CIS. Practical implications – The findings suggest that investment climate in the host countries must be enriched through suitable policies. Improved domestic conditions not only enhance the performance of multinational corporations but also allow host economies to reap greater benefits of FDI inflows. Moreover, the findings demonstrate that investment in both education and health are indispensable. Therefore, improved levels of education and health should be the primary objective running concurrently with other factors in order to stimulate economic growth. Originality/value – The choice of CIS has been made because very little research has been found for the region particularly in the area of economic growth despite strong evidence of commonality in terms of landlocked geographical layout and economic and political structures of these economies. The region has gained importance gradually after independence of these states; and it has started to attract foreign funds in the shape of FDI only recently. Thus, there is a need to evaluate the future prospects pertaining to the importance of FDI and HK on growth performance of these economies and will insistently contribute to the literature.

Foreign direct investment and environmental pollution in China: a simultaneous equations estimation

2010 ◽  
Vol 16 (1) ◽  
pp. 71-92 ◽  
Author(s):  
QUN BAO ◽  
YUANYUAN CHEN ◽  
LIGANG SONG
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Simultaneous Equations ◽  
Estimation Technique ◽  
Data Set ◽  
Composition Effects ◽  
Technique Effect ◽  
Regional Pollution ◽  
Indirect Technique ◽  
Pollution Emissions

ABSTRACTThis study investigates the effects of foreign direct investment (FDI) on emissions of five pollutants in China using a panel data set of 29 provinces over the period 1992–2004. The study applies a simultaneous equations estimation technique to estimate the scale, technique and composition effects of FDI on China's overall and regional pollution emissions. The estimation results show that FDI in general helps reduce pollution emissions in China, contributing largely to its technique effect. Capturing both the direct and indirect technique effects improves the accuracy in assessing the environmental impact of the FDI. The study also finds that the environmental impacts of FDI vary significantly among different regions and for different pollutants in China.

scholarly journals An Empirical Analysis of the Relationship among Foreign Direct Investment, Gross Domestic Product, CO2 Emissions, Renewable Energy Contribution in the context of the Environmental Kuznets Curve and Pollution Haven Hypothesis Regarding Turkey

2020 ◽  
Vol 4 (1) ◽  
pp. 110
Author(s):  
Mehman Karimov
Keyword(s):  
Environmental Kuznets Curve ◽  
Direct Investment ◽  
Environmental Regulations ◽  
Developed Countries ◽  
Kuznets Curve ◽  
Pollution Haven Hypothesis ◽  
Energy Contribution ◽  
Pollution Haven ◽  
Turkish Economy ◽  
Per Capita

This study examines the relationships between GDP per capita, CO2 emission, Renewable Energy Contribution (REC) and Foreign Direct Investment (FDI) and evaluates the Environmental Kuznets Curve (EKC) and Pollution Haven Hypothesis (PHH) for Turkey. The EKC theory says that with increase in income per capita the pollution also increases but in a turning point when nation become richer pollution starts to decrease according to stringency of environmental regulations and implying advanced green technologies due to requirement of nation. In another hand the PHH assume that due to stringency of environmental regulations and high taxes the production become more expensive in developed countries, thus those dirty industries shifts from environmentally stricter developed countries to poor regulated developing countries. The aim of this study to analyze and investigate: which theory (EKC or PHH) does exist in Turkish economy and does FDI has positive impact on sustainable development. The time series datasets (FDI, GDP, CO2 and REC) , those were obtained from World Bank database, which covers the time period 1970-2014 were utilized in employed statistical models as the ADF Unit Root, Philips – Perron, Johansen co-integration, and the Granger Causality tests, to accomplish the empirical part of the paper. Based on the empirical results, it was approved that there wasn`t existence of the EKC theory in Turkish economy. But according to obtained empirical results it was affirmed that there was the presence of the PHH theory in Turkish economy which means the FDI has a negative impact on sustainable development of Turkish economy. Thus, the developed countries with stricter environmental regulations (mostly from Europe) relocate their heavily polluted dirty industries to Turkish economy.

scholarly journals Does Foreign Direct Investment Affect Tropospheric SO2 Emissions? A Spatial Analysis in Eastern China from 2011 to 2017

2020 ◽  
Vol 12 (7) ◽  
pp. 2878 ◽  
Author(s):  
Yuxiang Yan ◽  
Wusheng Hu
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Spatial Regression ◽  
Eastern China ◽  
Spillover Effect ◽  
Air Pollutant ◽  
Pollution Haven Hypothesis ◽  
So2 Emissions ◽  
Pollution Haven ◽  
Spatial Regression Analysis

Air pollution has attracted much attention worldwide. Sulfur dioxide (SO 2 ) is a major air pollutant in cities and affects human health seriously. The purpose of this paper is to examine how foreign direct investment affects SO 2 emissions and whether the pollution haven hypothesis exists in eastern China. On basis of the detailed data, we performed the spatial autocorrelation analysis and the spatial regression analysis. The results show that an increase in the foreign direct investment in a city is associated with a decline in SO 2 emissions in the same city, indicating that the pollution haven hypothesis does not hold in eastern China. But the spillover effect of the foreign direct investment is positive, indicating that a larger foreign direct investment in neighboring cities tends to raise SO 2 emissions in the local city.

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