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To shut down or to shift: Multinationals and environmental regulation

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  • Naughton, Helen T.

Abstract

According to the pollution haven effect mobile capital responds to environmental regulation by moving from countries with high regulation to countries with low regulation. Previous tests of the pollution haven effect focus on host country regulation effect. This study also examines the effect of home country regulation on foreign direct investment (FDI). Using a panel of 28 OECD countries for 1990–2000 to estimate host and home country environmental regulations' effect on FDI, this study finds that host regulation decreases FDI. In contrast, home environmental regulation increases FDI at low levels of home regulation and decreases FDI at high levels of home regulation.

Suggested Citation

  • Naughton, Helen T., 2014. "To shut down or to shift: Multinationals and environmental regulation," Ecological Economics, Elsevier, vol. 102(C), pages 113-117.
    • Handle: RePEc:eee:ecolec:v:102:y:2014:i:c:p:113-117
    DOI: 10.1016/j.ecolecon.2014.03.013
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    More about this item

    Keywords

    Environmental regulation; Foreign direct investment;

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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