Foreign direct investment and environmental taxes

Arbeitspapier

This paper studies the effect of foreign direct investment (FDI) on environmental policy stringency in a two-country model with trade costs, where FDI could be unilateral and bilateral and both governments address local pollution through environmental taxes. We show that FDI does not give rise to ecological dumping because the host country has an incentive to shift rents away from the source country towards the host country. Environmental policy strategies and welfare effects are studied under the assumption that parameter values support FDI to be profitable.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 921

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Trade and Environment ; Multinational Firms; International Business
• Subject: environmental taxes ; Foreign Direct Investment ; multinational enterprises ; plant location ; Auslandsinvestition ; Ökosteuer ; Steuerwirkung ; Multinationales Unternehmen ; Transaktionskosten ; Betriebliche Standortwahl ; Zwei-Länder-Modell ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): De Santis, Roberto A. ; Stähler, Frank
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/153355
• Last update: 10.03.2025, 11:43 AM CET