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 |
|---|---|
| Pages (from-to) | 2796-2808 |
| Number of pages | 13 |
| Journal | Emerging Markets Finance and Trade |
| Volume | 55 |
| Issue number | 12 |
| DOIs | |
| Publication status | Published - 2019 Sept 26 |
Bibliographical note
Funding Information:The authors are grateful to the Editor Ali M. Kutan and three anonymous referees for their helpful comments and suggestions. All remaining errors are the authors’ responsibility. Dong-Eun Rhee gratefully acknowledges that this research is supported by a Korea University Grant.
Publisher Copyright:
©, Copyright © Taylor & Francis Group, LLC.
Keywords
- economic development
- environmental regulation
- foreign direct investment
- governance
ASJC Scopus subject areas
- Finance
- Economics, Econometrics and Finance(all)
