Strategic environmental regulation and inbound foreign direct investment in the People's Republic of China

Arbeitspapier

Using a new dataset on foreign direct investment (FDI) and a comprehensive measurement of environmental policy stringency and enforcement, this paper studies the spatial distribution of inbound FDI in manufacturing sectors by accounting for strategically determined environmental policies across Chinese cities over the period 2003-2014. In particular, we investigate how the stringency of environmental regulation affects the FDI inflow of a city and its neighbors. We find strong evidence that the pollution haven hypothesis applies to the People's Republic of China based on both spatial lag of X and two-stage least-squares estimates. In particular, the laxity of a city's own environmental regulation is positively associated with its inbound FDI. We further investigate the investment deflection effect and find that the laxity of neighboring environmental regulation is negatively related to the FDI inflows to a city.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ADBI Working Paper Series ; No. 1129

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models ; Economics of Regulation ; Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth ; Environmental Economics: Government Policy
• Subject: environmental regulation ; inbound foreign direct investment ; SLX model ; two-stage least squares ; pollution haven effect

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Huang, Bihong ; Yang, Zhuoxiang ; Yu, Yantuan
• Event: Veröffentlichung
• (who): Asian Development Bank Institute (ADBI)
• (where): Tokyo
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/238486
• Last update: 10.03.2025, 11:41 AM CET