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Agglomeration effects in foreign direct investment and the pollution haven hypothesis

dc.contributor.author Wagner, UJ
dc.contributor.author Timmins, CD
dc.date.accessioned 2010-03-09T15:42:59Z
dc.date.issued 2009-06-01
dc.identifier.issn 0924-6460
dc.identifier.uri https://hdl.handle.net/10161/2059
dc.description.abstract Does environmental regulation impair international competitiveness of pollution-intensive industries to the extent that they relocate to countries with less stringent regulation, turning those countries into "pollution havens"? We test this hypothesis using panel data on outward foreign direct investment (FDI) flows of various industries in the German manufacturing sector and account for several econometric issues that have been ignored in previous studies. Most importantly, we demonstrate that externalities associated with FDI agglomeration can bias estimates away from finding a pollution haven effect if omitted from the analysis. We include the stock of inward FDI as a proxy for agglomeration and employ a GMM estimator to control for endogenous time-varying determinants of FDI flows. Furthermore, we propose a difference estimator based on the least polluting industry to break the possible correlation between environmental regulatory stringency and unobservable attributes of FDI recipients in the cross-section. When accounting for these issues we find robust evidence of a pollution haven effect for the chemical industry. © 2008 Springer Science+Business Media B.V.
dc.format.mimetype application/pdf
dc.language.iso en_US
dc.publisher Springer Science and Business Media LLC
dc.relation.ispartof Environmental and Resource Economics
dc.relation.isversionof 10.1007/s10640-008-9236-6
dc.title Agglomeration effects in foreign direct investment and the pollution haven hypothesis
dc.type Journal article
duke.contributor.id Timmins, CD|0331720
pubs.begin-page 231
pubs.end-page 256
pubs.issue 2
pubs.organisational-group Duke
pubs.organisational-group Economics
pubs.organisational-group Environmental Sciences and Policy
pubs.organisational-group Nicholas School of the Environment
pubs.organisational-group Trinity College of Arts & Sciences
pubs.publication-status Published
pubs.volume 43


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