Pollution Havens, Endogenous Environmental Policy and Foreign Direct Investment

2014 ◽  
pp. 140515071903005
Author(s):  
Ida Ferrara ◽  
Paul Missios ◽  
Halis Murat Yildiz
Keyword(s):  
Foreign Direct Investment ◽  
Environmental Policy ◽  
Direct Investment ◽  
Pollution Havens

scholarly journals Foreign Direct Investment and the Choice of Environmental Policy

2021 ◽  
Author(s):  
Paul Missios ◽  
Halis Murat Yildiz ◽  
Ida Ferrara
Keyword(s):  
Foreign Direct Investment ◽  
Environmental Policy ◽  
Direct Investment ◽  
Environmental Standards ◽  
Profit Shifting ◽  
Playing Field ◽  
Oligopoly Model ◽  
Mode Of Entry ◽  
World Markets ◽  
Pollution Havens

We use a simple two-country oligopoly model of intra-industry trade to examine the implications of foreign direct investment for the pollution haven hypothesis and environmental policy. Countries which lower environmental standards to be more competitive in world markets generate pollution havens if environmental policy is exogenous. However, if FDI is a viable option as a mode of entry, profit-shifting considerations weaken in favour of environmental considerations and FDI recipients tighten environmental policy, reducing incentives to relocate production. Interestingly, when countries are sufficiently similar in their environmental awareness, "grey" countries can become greener than originally "green" countries but firms in the latter still engage in FDI in the former, in spite of the stricter standard they face, in order to level the playing field. We derive conditions under which FDI-receiving countries have incentives to manipulate their environmental standards to prevent or attract FDI, potentially eliminating or creating pollution havens.

scholarly journals Foreign Direct Investment and the Choice of Environmental Policy

2021 ◽  
Author(s):  
Paul Missios ◽  
Halis Murat Yildiz ◽  
Ida Ferrara
Keyword(s):  
Foreign Direct Investment ◽  
Environmental Policy ◽  
Direct Investment ◽  
Environmental Standards ◽  
Profit Shifting ◽  
Playing Field ◽  
Oligopoly Model ◽  
Mode Of Entry ◽  
World Markets ◽  
Pollution Havens

We use a simple two-country oligopoly model of intra-industry trade to examine the implications of foreign direct investment for the pollution haven hypothesis and environmental policy. Countries which lower environmental standards to be more competitive in world markets generate pollution havens if environmental policy is exogenous. However, if FDI is a viable option as a mode of entry, profit-shifting considerations weaken in favour of environmental considerations and FDI recipients tighten environmental policy, reducing incentives to relocate production. Interestingly, when countries are sufficiently similar in their environmental awareness, "grey" countries can become greener than originally "green" countries but firms in the latter still engage in FDI in the former, in spite of the stricter standard they face, in order to level the playing field. We derive conditions under which FDI-receiving countries have incentives to manipulate their environmental standards to prevent or attract FDI, potentially eliminating or creating pollution havens.

scholarly journals Ecological Footprint, Foreign Direct Investment, and Gross Domestic Production: Evidence of Belt & Road Initiative Countries

2018 ◽  
Vol 10 (10) ◽  
pp. 3527 ◽  
Author(s):  
Hongbo Liu ◽  
Hanho Kim
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Ecological Footprint ◽  
Kuznets Curve ◽  
Impulse Response Functions ◽  
Domestic Production ◽  
Bidirectional Relationship ◽  
Gross Domestic Production ◽  
Panel Vector Autoregression ◽  
Pollution Havens

This research is employed to examine the environmental issues embedded in Belt & Road Initiative (BRI), to be more specific: testify which of these hypotheses: Pollution Havens Hypothesis, Pollution Halo Hypothesis, Environmental Kuznets Curve is in accordance with the current development condition of BRI counties; whether there exists a bidirectional relationship among Ecological Footprint, Gross Domestic Production, Foreign Direct Investment (FDI) in Belt & Road Initiative countries. In this paper, Panel Vector Autoregression is utilized to analyze a dataset of 44-member countries in this initiative, ranges from 1990 to 2016, to empirically testify the environmental evaluation of this project. Results are analyzed on both long-run and short-run cases through Orthogonalized Impulse-Response Functions (IRF). This research displays a great heterogeneity among different target variables, FDI as a main variable of interest does not expose a bidirectional relationship with Ecological Footprint, only Ecological Footprint demonstrates robust influence on FDI. In addition, Pollution Havens Hypothesis is certified to be true for FDI and GDP among Belt & Road Initiative member countries.

scholarly journals Environmental Regulation and Foreign Direct Investment: Evidence from China’s Eleventh and Twelfth Five-Year Plans

2020 ◽  
Vol 12 (6) ◽  
pp. 2528 ◽  
Author(s):  
Yuqing Ge ◽  
Yucai Hu ◽  
Shenggang Ren
Keyword(s):  
Foreign Direct Investment ◽  
Environmental Policy ◽  
Environmental Regulation ◽  
Direct Investment ◽  
So2 Emissions ◽  
Negative Effects ◽  
Environmental Enforcement ◽  
Fdi Inflows ◽  
Pollution Haven ◽  
Pollution Haven Effect

This paper investigates environmental regulation and its impact on inward foreign direct investment (FDI) in developing countries. Based on the Chinese province-industry-level panel data in the period 2001 to 2015, we use a difference-in-difference-in-differences (DDD) model to evaluate pollution haven behavior in the context of China’s 11th and 12th Five-Year Plans SO2 emissions reduction policy. The results show that the policy leads to fewer FDI inflows to its highly-polluting industries in provinces with tougher pollution reduction targets. In addition, the environmental policy has significantly inhibited FDI inflows in provinces with stricter environmental enforcement, while investment in provinces with worse environmental enforcement is insensitive to environmental policy. These findings are consistent with pollution haven behavior. In contrast, FDI in industries with high levels of technology is not significantly influenced by the policy, whereas the FDI in industries with low levels of technology shows a negative response to environmental policy. This is overall evidence confirming a pollution haven effect (PHE), although technology differences could alleviate the negative effects of environmental regulation on inward FDI.

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