Abstract
It is widely believed that environmental regulations in a developing country increase abatement costs for firms and, in turn, make the country a less attractive investment avenue for multinational firms from advanced economies. Using panel data of 120 developing countries from 2000 to 2014, this study empirically investigates whether stringent environmental regulations deter foreign direct investment (FDI) in developing countries. The empirical results are the exact opposite of the pollution haven effect, namely, stringent environmental regulations significantly attract FDI, a circumstance that causes a “race to the top.” The results are robust when tested against various specifications.
| Original language | English |
|---|---|
| Journal | Emerging Markets Finance and Trade |
| DOIs | |
| Publication status | Accepted/In press - 2018 Jan 1 |
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Keywords
- economic development
- environmental regulation
- foreign direct investment
- governance
ASJC Scopus subject areas
- Finance
- Economics, Econometrics and Finance(all)
Cite this
Do Stringent Environmental Regulations Attract Foreign Direct Investment in Developing Countries? Evidence on the “Race to the Top” from Cross-Country Panel Data. / Kim, Yeseul; Rhee, Dong-Eun.
In: Emerging Markets Finance and Trade, 01.01.2018.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Do Stringent Environmental Regulations Attract Foreign Direct Investment in Developing Countries? Evidence on the “Race to the Top” from Cross-Country Panel Data
AU - Kim, Yeseul
AU - Rhee, Dong-Eun
PY - 2018/1/1
Y1 - 2018/1/1
N2 - It is widely believed that environmental regulations in a developing country increase abatement costs for firms and, in turn, make the country a less attractive investment avenue for multinational firms from advanced economies. Using panel data of 120 developing countries from 2000 to 2014, this study empirically investigates whether stringent environmental regulations deter foreign direct investment (FDI) in developing countries. The empirical results are the exact opposite of the pollution haven effect, namely, stringent environmental regulations significantly attract FDI, a circumstance that causes a “race to the top.” The results are robust when tested against various specifications.
AB - It is widely believed that environmental regulations in a developing country increase abatement costs for firms and, in turn, make the country a less attractive investment avenue for multinational firms from advanced economies. Using panel data of 120 developing countries from 2000 to 2014, this study empirically investigates whether stringent environmental regulations deter foreign direct investment (FDI) in developing countries. The empirical results are the exact opposite of the pollution haven effect, namely, stringent environmental regulations significantly attract FDI, a circumstance that causes a “race to the top.” The results are robust when tested against various specifications.
KW - economic development
KW - environmental regulation
KW - foreign direct investment
KW - governance
UR - http://www.scopus.com/inward/record.url?scp=85059953935&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85059953935&partnerID=8YFLogxK
U2 - 10.1080/1540496X.2018.1531240
DO - 10.1080/1540496X.2018.1531240
M3 - Article
JO - Emerging Markets Finance and Trade
JF - Emerging Markets Finance and Trade
SN - 1540-496X
ER -