Are Foreign Investors Attracted to Weak Environmental Regulations? Evaluating the Evidence from China

One of the most contentious debates today is whether pollution-intensive industries from rich countries relocate to poor countries with weaker environmental standards, turning them into pollution havens. Empirical studies to date show little evidence to support the pollution haven hypothesis, but su...

Full description

Bibliographic Details
Main Authors:	Dean, Judith M., Lovely, Mary E., Wang, Hua
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ABATEMENT ABATEMENT COSTS AIR AIR POLLUTION AIR QUALITY ALTERNATIVE APPROACH CENTRAL PLANNING CITIES CONSTRUCTION CORRUPTION COST MINIMIZATION DATA SETS DEMAND CURVE DEVELOPED COUNTRIES ECONOMIC CENSUSES ECONOMIC COOPERATION ECONOMICS ELASTICITY ELASTICITY OF SUBSTITUTION EMISSIONS EMISSIONS STANDARDS EMPIRICAL STUDIES ENVIRONMENTAL REGULATIONS EQUILIBRIUM EXPORTS GDP GDP PER CAPITA INCOME INDUSTRIAL POLLUTION INNOVATION INTERMEDIATE GOODS INTERNATIONAL TRADE LABOR COSTS LABOR FORCE LABOR PRODUCTIVITY LEGAL FRAMEWORK LOCAL AUTHORITIES MAXIMUM LIKELIHOOD ESTIMATION MONOPOLISTIC COMPETITION NATURAL RESOURCES NEGOTIATIONS PARENTS PER CAPITA INCOME POLICY RESEARCH POLLUTION POLLUTION ABATEMENT POLLUTION CONTROL POLLUTION FEES POLLUTION TAX POLLUTION TAXES PRICE TAKERS PRODUCERS PRODUCTION FUNCTION PRODUCTION TECHNOLOGY PROFIT MAXIMIZATION QUALITY STANDARDS RENEWABLE RESOURCES SERVICE PROVIDERS SUPPLIERS TAX REVENUES TAX SUBSIDIES TAXATION TECHNOLOGICAL PROGRESS TELECOMMUNICATIONS TIME SERIES TOBACCO TRANSPORTATION TREATIES VALUE OF OUTPUT VARIABLE COSTS VARIABLE INPUTS VENEZUELA WAGES WASTE WASTEWATER WATER POLLUTION WEIGHT WORKERS
Online Access:	http://documents.worldbank.org/curated/en/2005/02/5625015/foreign-investors-attracted-weak-environmental-regulations-evaluating-evidence-china http://hdl.handle.net/10986/8902

id	okr-10986-8902
recordtype	oai_dc
spelling	okr-10986-89022021-04-23T14:02:42Z Are Foreign Investors Attracted to Weak Environmental Regulations? Evaluating the Evidence from China Dean, Judith M. Lovely, Mary E. Wang, Hua ABATEMENT ABATEMENT COSTS AIR AIR POLLUTION AIR QUALITY ALTERNATIVE APPROACH CENTRAL PLANNING CITIES CONSTRUCTION CORRUPTION COST MINIMIZATION DATA SETS DEMAND CURVE DEVELOPED COUNTRIES ECONOMIC CENSUSES ECONOMIC COOPERATION ECONOMICS ELASTICITY ELASTICITY OF SUBSTITUTION EMISSIONS EMISSIONS STANDARDS EMPIRICAL STUDIES ENVIRONMENTAL REGULATIONS EQUILIBRIUM EXPORTS GDP GDP PER CAPITA INCOME INDUSTRIAL POLLUTION INNOVATION INTERMEDIATE GOODS INTERNATIONAL TRADE LABOR COSTS LABOR FORCE LABOR PRODUCTIVITY LEGAL FRAMEWORK LOCAL AUTHORITIES MAXIMUM LIKELIHOOD ESTIMATION MONOPOLISTIC COMPETITION NATURAL RESOURCES NEGOTIATIONS PARENTS PER CAPITA INCOME POLICY RESEARCH POLLUTION POLLUTION ABATEMENT POLLUTION CONTROL POLLUTION FEES POLLUTION TAX POLLUTION TAXES PRICE TAKERS PRODUCERS PRODUCTION FUNCTION PRODUCTION TECHNOLOGY PROFIT MAXIMIZATION QUALITY STANDARDS RENEWABLE RESOURCES SERVICE PROVIDERS SUPPLIERS TAX REVENUES TAX SUBSIDIES TAXATION TECHNOLOGICAL PROGRESS TELECOMMUNICATIONS TIME SERIES TOBACCO TRANSPORTATION TREATIES VALUE OF OUTPUT VARIABLE COSTS VARIABLE INPUTS VENEZUELA WAGES WASTE WASTEWATER WATER POLLUTION WEIGHT WORKERS One of the most contentious debates today is whether pollution-intensive industries from rich countries relocate to poor countries with weaker environmental standards, turning them into pollution havens. Empirical studies to date show little evidence to support the pollution haven hypothesis, but suffer potentially from omitted variable bias, specification, and measurement errors. The authors estimate the strength of pollution-haven behavior by examining the location choices of equity joint venture (EJV) projects in China. They derive a location choice model from a theoretical framework that incorporates the firm's production and abatement decision, agglomeration, and factor abundance. The authors estimate conditional logit and nested logit models using new data sets containing information on a sample of EJV projects, effective environmental levies on water pollution, and estimates of Chinese pollution-intensity for 3-digit ISIC (International Standard Industrial Classification) industries. Results from 2,886 manufacturing joint venture projects from 1993-96 show that EJVs from all source countries go into provinces with high concentrations of foreign investment, relatively abundant stocks of skilled workers, concentrations of potential local suppliers, special incentives, and less state ownership. Environmental stringency does affect location choice, but not as expected. Low environmental levies are a significant attraction only for joint ventures in highly-polluting industries with partners from Hong Kong, Macao, and Taiwan (China). In contrast, joint ventures with partners from OECD sources are not attracted by low environmental levies, regardless of the pollution intensity of the industry. The authors discuss the likely role of technological differences in explaining these results. 2012-06-25T14:08:18Z 2012-06-25T14:08:18Z 2005-02 http://documents.worldbank.org/curated/en/2005/02/5625015/foreign-investors-attracted-weak-environmental-regulations-evaluating-evidence-china http://hdl.handle.net/10986/8902 English Policy Research Working Paper No. 3505 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research East Asia and Pacific China
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ABATEMENT ABATEMENT COSTS AIR AIR POLLUTION AIR QUALITY ALTERNATIVE APPROACH CENTRAL PLANNING CITIES CONSTRUCTION CORRUPTION COST MINIMIZATION DATA SETS DEMAND CURVE DEVELOPED COUNTRIES ECONOMIC CENSUSES ECONOMIC COOPERATION ECONOMICS ELASTICITY ELASTICITY OF SUBSTITUTION EMISSIONS EMISSIONS STANDARDS EMPIRICAL STUDIES ENVIRONMENTAL REGULATIONS EQUILIBRIUM EXPORTS GDP GDP PER CAPITA INCOME INDUSTRIAL POLLUTION INNOVATION INTERMEDIATE GOODS INTERNATIONAL TRADE LABOR COSTS LABOR FORCE LABOR PRODUCTIVITY LEGAL FRAMEWORK LOCAL AUTHORITIES MAXIMUM LIKELIHOOD ESTIMATION MONOPOLISTIC COMPETITION NATURAL RESOURCES NEGOTIATIONS PARENTS PER CAPITA INCOME POLICY RESEARCH POLLUTION POLLUTION ABATEMENT POLLUTION CONTROL POLLUTION FEES POLLUTION TAX POLLUTION TAXES PRICE TAKERS PRODUCERS PRODUCTION FUNCTION PRODUCTION TECHNOLOGY PROFIT MAXIMIZATION QUALITY STANDARDS RENEWABLE RESOURCES SERVICE PROVIDERS SUPPLIERS TAX REVENUES TAX SUBSIDIES TAXATION TECHNOLOGICAL PROGRESS TELECOMMUNICATIONS TIME SERIES TOBACCO TRANSPORTATION TREATIES VALUE OF OUTPUT VARIABLE COSTS VARIABLE INPUTS VENEZUELA WAGES WASTE WASTEWATER WATER POLLUTION WEIGHT WORKERS
spellingShingle	ABATEMENT ABATEMENT COSTS AIR AIR POLLUTION AIR QUALITY ALTERNATIVE APPROACH CENTRAL PLANNING CITIES CONSTRUCTION CORRUPTION COST MINIMIZATION DATA SETS DEMAND CURVE DEVELOPED COUNTRIES ECONOMIC CENSUSES ECONOMIC COOPERATION ECONOMICS ELASTICITY ELASTICITY OF SUBSTITUTION EMISSIONS EMISSIONS STANDARDS EMPIRICAL STUDIES ENVIRONMENTAL REGULATIONS EQUILIBRIUM EXPORTS GDP GDP PER CAPITA INCOME INDUSTRIAL POLLUTION INNOVATION INTERMEDIATE GOODS INTERNATIONAL TRADE LABOR COSTS LABOR FORCE LABOR PRODUCTIVITY LEGAL FRAMEWORK LOCAL AUTHORITIES MAXIMUM LIKELIHOOD ESTIMATION MONOPOLISTIC COMPETITION NATURAL RESOURCES NEGOTIATIONS PARENTS PER CAPITA INCOME POLICY RESEARCH POLLUTION POLLUTION ABATEMENT POLLUTION CONTROL POLLUTION FEES POLLUTION TAX POLLUTION TAXES PRICE TAKERS PRODUCERS PRODUCTION FUNCTION PRODUCTION TECHNOLOGY PROFIT MAXIMIZATION QUALITY STANDARDS RENEWABLE RESOURCES SERVICE PROVIDERS SUPPLIERS TAX REVENUES TAX SUBSIDIES TAXATION TECHNOLOGICAL PROGRESS TELECOMMUNICATIONS TIME SERIES TOBACCO TRANSPORTATION TREATIES VALUE OF OUTPUT VARIABLE COSTS VARIABLE INPUTS VENEZUELA WAGES WASTE WASTEWATER WATER POLLUTION WEIGHT WORKERS Dean, Judith M. Lovely, Mary E. Wang, Hua Are Foreign Investors Attracted to Weak Environmental Regulations? Evaluating the Evidence from China
geographic_facet	East Asia and Pacific China
relation	Policy Research Working Paper No. 3505
description	One of the most contentious debates today is whether pollution-intensive industries from rich countries relocate to poor countries with weaker environmental standards, turning them into pollution havens. Empirical studies to date show little evidence to support the pollution haven hypothesis, but suffer potentially from omitted variable bias, specification, and measurement errors. The authors estimate the strength of pollution-haven behavior by examining the location choices of equity joint venture (EJV) projects in China. They derive a location choice model from a theoretical framework that incorporates the firm's production and abatement decision, agglomeration, and factor abundance. The authors estimate conditional logit and nested logit models using new data sets containing information on a sample of EJV projects, effective environmental levies on water pollution, and estimates of Chinese pollution-intensity for 3-digit ISIC (International Standard Industrial Classification) industries. Results from 2,886 manufacturing joint venture projects from 1993-96 show that EJVs from all source countries go into provinces with high concentrations of foreign investment, relatively abundant stocks of skilled workers, concentrations of potential local suppliers, special incentives, and less state ownership. Environmental stringency does affect location choice, but not as expected. Low environmental levies are a significant attraction only for joint ventures in highly-polluting industries with partners from Hong Kong, Macao, and Taiwan (China). In contrast, joint ventures with partners from OECD sources are not attracted by low environmental levies, regardless of the pollution intensity of the industry. The authors discuss the likely role of technological differences in explaining these results.
format	Publications & Research :: Policy Research Working Paper
author	Dean, Judith M. Lovely, Mary E. Wang, Hua
author_facet	Dean, Judith M. Lovely, Mary E. Wang, Hua
author_sort	Dean, Judith M.
title	Are Foreign Investors Attracted to Weak Environmental Regulations? Evaluating the Evidence from China
title_short	Are Foreign Investors Attracted to Weak Environmental Regulations? Evaluating the Evidence from China
title_full	Are Foreign Investors Attracted to Weak Environmental Regulations? Evaluating the Evidence from China
title_fullStr	Are Foreign Investors Attracted to Weak Environmental Regulations? Evaluating the Evidence from China
title_full_unstemmed	Are Foreign Investors Attracted to Weak Environmental Regulations? Evaluating the Evidence from China
title_sort	are foreign investors attracted to weak environmental regulations? evaluating the evidence from china
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2005/02/5625015/foreign-investors-attracted-weak-environmental-regulations-evaluating-evidence-china http://hdl.handle.net/10986/8902
_version_	1764407085700743168

Are Foreign Investors Attracted to Weak Environmental Regulations? Evaluating the Evidence from China

Similar Items