Description: Pollution Havens and Foreign Direct Investment : Dirty Secret or Popular Myth?

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Pollution Havens and Foreign Direct Investment : Dirty Secret or Popular Myth?

The "pollution haven" hypothesis refers to the possibility that multinational firms, particularly those engaged in highly polluting activities, relocate to countries with weaker environmental standards. Despite the plausibility and popula...

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Bibliographic Details
Main Authors:	Smarzynska, Beata K., Wei, Shang-Jin
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ABATEMENT ABATEMENT CAPITAL ABATEMENT COSTS AIR POLLUTION AIR QUALITY BACTERIA BIOCHEMICAL OXYGEN DEMAND CARBON CARBON DIOXIDE CHEMICAL POLLUTION COAL COMPARATIVE ADVANTAGE CONSTRUCTION CORPORATE TAXES DEVELOPED COUNTRIES ECONOMIC ACTIVITY ECONOMIC ANALYSIS EFFLUENT EMISSION EMISSION STANDARDS EMISSIONS EMISSIONS LEVELS EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPIRICAL STUDIES ENVIRONMENTAL IMPACT ENVIRONMENTAL IMPACT ASSESSMENT ENVIRONMENTAL MANAGEMENT ENVIRONMENTAL PERFORMANCE ENVIRONMENTAL POLICIES ENVIRONMENTAL POLICY ENVIRONMENTAL PROTECTION ENVIRONMENTAL REGULATIONS EXPENDITURES GAS GREASE IMPORTS INCOME LABOR COSTS LAKES LEGISLATION MPC OIL OXYGEN PASTURES POLITICAL ECONOMY POLLUTANT POLLUTION POLLUTION ABATEMENT POLLUTION CONTROL POLLUTION CONTROL LAWS POLLUTION INTENSITY PROPERTY RIGHTS SULFUR TAX RATES TOXIC SUBSTANCES TOXICITY TOXICS TRANSBOUNDARY EFFECTS OF INDUSTRIAL ACCIDENTS TREATIES WASTE WATER POLLUTANT WATER POLLUTANTS MULTINATIONAL ENTERPRISES INDUSTRIAL POLLUTION ENVIRONMENTAL STANDARDS CORRUPTION IN POLITICS STATISTICAL ANALYSIS TRANSITIONAL ECONOMIES INVESTMENT PROJECTS FOREIGN DIRECT INVESTMENTS INTERNATIONAL TREATIES WATER QUALITY MULTINATIONAL ENTERPRISES
Online Access:	http://documents.worldbank.org/curated/en/2001/09/1614728/pollution-havens-foreign-direct-investment-dirty-secret-or-popular-myth http://hdl.handle.net/10986/19555

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Summary:	The "pollution haven" hypothesis refers to the possibility that multinational firms, particularly those engaged in highly polluting activities, relocate to countries with weaker environmental standards. Despite the plausibility and popularity of this hypothesis, there is little evidence to support it. The authors identify four obstacles that may have impeded researchers' ability to find evidence in favor of the "pollution haven" hypothesis: 1) The possibility that some features of host countries, such as bureaucratic corruption, may deter inward foreign direct investment and also be positively correlated with lax environmental standards. Omitting this information in statistical analyses may produce misleading results. 2) The possibility that country- or industry-level data, typically used in the literature, may have masked the effect at the firm level. 3) Difficulties associated with measuring environmental standards of the host countries. 4) Difficulties associated with the measuring the pollution intensity of the multinational firms. The authors attempt to surmount these obstacles by explicitly taking into account corruption in host countries and using a firm-level data set on investment projects in 24 transition economies. With these improvements, the authors find some support for the "pollution haven" hypothesis, but evidence is still weak and does not survive numerous robustness checks.