A meta-analysis of FDI and environmental regulations

Previous authors have been unable to agree on whether environmental regulations hinder foreign direct investment (FDI). The empirical evidence in this domain remains inconclusive because of the contrasting results observed in the literature, owing to the differing characteristics of the data sets an...

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Bibliographic Details
Published in:Environment and development economics 2015-04, Vol.20 (2), p.185-208
Main Author: Rezza, Alief A.
Format: Article
Language:English
Subjects:
Developing countries
Economics
Empirical analysis
Environment
Environmental regulations
Estimates
Financing
Foreign investment
Foreign investments
Government spending
Governments
Hypotheses
Industrial development
Industry
International trade
Investigation
Investigations
Investment
Jurisdiction
LDCs
Meta-analysis
Pollution
Pollution abatement
Pollution control
Regulation
Regulations
Research design
Studies
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Summary:Previous authors have been unable to agree on whether environmental regulations hinder foreign direct investment (FDI). The empirical evidence in this domain remains inconclusive because of the contrasting results observed in the literature, owing to the differing characteristics of the data sets and models used in previous studies. The present study carries out a meta-analysis on a sample of published and unpublished papers on the so-called pollution haven hypothesis (PHH) in order to investigate whether certain aspects of research design affect the presented findings. The paper offers explanations for the mixed findings reported in the literature by suggesting that certain aspects of research design are crucial to explaining their significance. The PHH is more likely to be supported by studies that define FDI as the establishment of new plants and those that use government spending as a proxy for the strictness of environmental regulations. Moreover, focusing investigations on pollution-intensive industries or developing countries hardly increases the likelihood of achieving results that support the PHH.
ISSN:1355-770X
1469-4395
DOI:10.1017/S1355770X14000114