Environmental Regulation Induced Foreign Direct Investment

Springer Science and Business Media LLC - Tập 55 - Trang 141-158 - 2012
Robert J. R. Elliott1, Ying Zhou2
1Department of Economics, University of Birmingham, Birmingham, UK
2Aston Business School, Aston University, Aston Triangle, Birmingham, UK

Tóm tắt

The last decade has witnessed a renewed interest in the relationship between environmental regulations and international capital flows. However, empirical studies have so far failed to find conclusive evidence for this so-called pollution haven or race to the bottom effect where foreign direct investment (FDI) is assumed to be attracted to low regulation countries, regions or states. In this paper we present a simple theoretical framework to demonstrate that greater stringency in environmental standards can lead to a strategic increase in capital inflows which we refer to as environmental regulation induced FDI. Our result reveals a possible explanation for the mixed results in the empirical literature and provides an illustration of the conditions under which environmental regulations in the host country can affect the location decision of foreign firms.

Tài liệu tham khảo

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