Does Lax Environmental Regulation Attract FDI When Accounting For "Third-Country" Effects?

Arbeitspapier

This paper investigates if differences in environmental regulations can influence FDI flows in a multi-country setting taking into account the so-called "third-country" effects. We examine bilateral FDI flows using a new extended OECD investment database which covers great number of host countries and a long sample period (1981-2005). The findings based on a spatial gravity-like model are largely plausible across specifications and confirm the existence of a negative relationship between FDI and environmental stringency, once we correct for endogeneity and spatial dependence. The evidence of a positive "third-country" effect for FDI suggests the prevalence of complex FDI from developed to developing countries. The spatial structure of the model allows also to underline the possible existence of competition in environmental standards between countries to attract FDI.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IRENE Working Paper ; No. 08-01

Classification and Topics

• Classification: Wirtschaft ; Trade and Environment ; Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth ; Multiple or Simultaneous Equation Models: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
• Subject: Complex FDI ; Pollution Haven ; Spatial Econometrics ; System GMM

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kukenova, Madina ; Monteiro, José-Antonio
• Event: Veröffentlichung
• (who): University of Neuchâtel, Institute of Economic Research (IRENE)
• (where): Neuchâtel
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/191458
• Last update: 10.03.2025, 11:44 AM CET