IDEAS home Printed from https://ideas.repec.org/a/eee/streco/v60y2022icp482-495.html
   My bibliography  Save this article

Can a colonial legacy explain the pollution haven hypothesis? A city-level panel analysis

Author

Listed:
  • Wang, Hao
  • Luo, Qi

Abstract

There has long been a debate on how inward foreign direct investment (FDI) affects host countries’ natural environment. From a historical perspective, we investigate how colonial legacy relates to the FDI's environmental externalities in China. Our empirical strategy is based on a panel dataset of 288 Chinese cities over the period from 2011 to 2016 and amassed information about China's modern history from 1842 to 1955, with focus on several types of industrial pollution indicators including sulfur dioxide, wastewater, and haze emissions. Our results show that FDI has a positive effect on environmental pollution and this effect is intensified in regions with colonial influence in general. When we further identify the two natures of colonization experience, we find that the intensified environmental impact of FDI is more pronounced with the Western colonial influence while it is insignificant with Japanese colonial influence. These findings are robust to applying different methods including random effect, fixed effect and system GMM.

Suggested Citation

  • Wang, Hao & Luo, Qi, 2022. "Can a colonial legacy explain the pollution haven hypothesis? A city-level panel analysis," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 482-495.
    • Handle: RePEc:eee:streco:v:60:y:2022:i:c:p:482-495
    DOI: 10.1016/j.strueco.2022.01.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0954349X22000042
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.strueco.2022.01.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
    2. Grossman, G.M & Krueger, A.B., 1991. "Environmental Impacts of a North American Free Trade Agreement," Papers 158, Princeton, Woodrow Wilson School - Public and International Affairs.
    3. Daniel L. Millimet & Jayjit Roy, 2016. "Empirical Tests of the Pollution Haven Hypothesis When Environmental Regulation is Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(4), pages 652-677, June.
    4. Matthew A. Cole & Robert J.R. Elliott & Jing Zhang, 2011. "Growth, Foreign Direct Investment, And The Environment: Evidence From Chinese Cities," Journal of Regional Science, Wiley Blackwell, vol. 51(1), pages 121-138, February.
    5. Gene M. Grossman & Alan B. Krueger, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 353-377.
    6. Erik Dietzenbacher & Kakali Mukhopadhyay, 2007. "An Empirical Examination of the Pollution Haven Hypothesis for India: Towards a Green Leontief Paradox?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 36(4), pages 427-449, April.
    7. Wang, Hao & Fidrmuc, Jan & Luo, Qi, 2021. "A spatial analysis of inward FDI and urban–rural wage inequality in China," Economic Systems, Elsevier, vol. 45(3).
    8. Rahel Aichele & Gabriel Felbermayr, 2015. "Kyoto and Carbon Leakage: An Empirical Analysis of the Carbon Content of Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 104-115, March.
    9. He, Jie, 2006. "Pollution haven hypothesis and environmental impacts of foreign direct investment: The case of industrial emission of sulfur dioxide (SO2) in Chinese provinces," Ecological Economics, Elsevier, vol. 60(1), pages 228-245, November.
    10. Judith M. Dean & Mary E. Lovely & Hua Wang, 2017. "Are foreign investors attracted to weak environmental regulations? Evaluating the evidence from China," World Scientific Book Chapters, in: Mary E Lovely (ed.), International Economic Integration and Domestic Performance, chapter 9, pages 155-167, World Scientific Publishing Co. Pte. Ltd..
    11. Zhang, Chuanguo & Zhou, Xiangxue, 2016. "Does foreign direct investment lead to lower CO2 emissions? Evidence from a regional analysis in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 58(C), pages 943-951.
    12. Shahbaz, Muhammad & Nasir, Muhammad Ali & Hille, Erik & Mahalik, Mantu Kumar, 2020. "UK's net-zero carbon emissions target: Investigating the potential role of economic growth, financial development, and R&D expenditures based on historical data (1870–2017)," Technological Forecasting and Social Change, Elsevier, vol. 161(C).
    13. Hao Wang & Qi Luo, 2020. "How colonial legacy shapes the impact of inward FDI on GDP? Evidence from China," Applied Economics Letters, Taylor & Francis Journals, vol. 27(9), pages 740-743, May.
    14. Head, Keith & Mayer, Thierry & Ries, John, 2010. "The erosion of colonial trade linkages after independence," Journal of International Economics, Elsevier, vol. 81(1), pages 1-14, May.
    15. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    16. John H. Dunning & Sarianna M. Lundan, 2008. "Multinational Enterprises and the Global Economy, Second Edition," Books, Edward Elgar Publishing, number 3215.
    17. Wang, Hao & Fidrmuc, Jan & Tian, Yunhua, 2020. "Growing against the background of colonization? Chinese labor market and FDI in a historical perspective," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 1018-1031.
    18. Long, Cheryl & Murrell, Peter & Yang, Li, 2019. "Memories of colonial law: The inheritance of human capital and the location of joint ventures in early-reform China," China Economic Review, Elsevier, vol. 58(C).
    19. Chowdhury, Reza H. & Maung, Min, 2018. "Historical ties between nations: How do they matter in cross-border mergers and acquisitions?," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 30-48.
    20. Sascha O. Becker & Katrin Boeckh & Christa Hainz & Ludger Woessmann, 2016. "The Empire Is Dead, Long Live the Empire! Long‐Run Persistence of Trust and Corruption in the Bureaucracy," Economic Journal, Royal Economic Society, vol. 126(590), pages 40-74, February.
    21. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "Does Culture Affect Economic Outcomes?," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 23-48, Spring.
    22. Ruixue Jia, 2014. "The Legacies of Forced Freedom: China's Treaty Ports," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 596-608, October.
    23. Jing Lan & Makoto Kakinaka & Xianguo Huang, 2012. "Foreign Direct Investment, Human Capital and Environmental Pollution in China," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(2), pages 255-275, February.
    24. Shahbaz, Muhammad & Nasir, Muhammad Ali & Roubaud, David, 2018. "Environmental degradation in France: The effects of FDI, financial development, and energy innovations," Energy Economics, Elsevier, vol. 74(C), pages 843-857.
    25. Huang, Jianhuan & Chen, Xudong & Huang, Bihong & Yang, Xiaoguang, 2017. "Economic and environmental impacts of foreign direct investment in China: A spatial spillover analysis," China Economic Review, Elsevier, vol. 45(C), pages 289-309.
    26. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    27. Asiedu, Elizabeth & Lien, Donald, 2011. "Democracy, foreign direct investment and natural resources," Journal of International Economics, Elsevier, vol. 84(1), pages 99-111, May.
    28. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    29. Gerald Yong Gao & Danny Tan Wang & Yi Che, 2018. "Impact of historical conflict on FDI location and performance: Japanese investment in China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(8), pages 1060-1080, October.
    30. Banerjee, Suvajit, 2021. "Conjugation of border and domestic carbon adjustment and implications under production and consumption-based accounting of India's National Emission Inventory: A recursive dynamic CGE analysis," Structural Change and Economic Dynamics, Elsevier, vol. 57(C), pages 68-86.
    31. Natalia Zugravu-Soilita, 2017. "How does Foreign Direct Investment Affect Pollution? Toward a Better Understanding of the Direct and Conditional Effects," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(2), pages 293-338, February.
    32. Eskeland, Gunnar S. & Harrison, Ann E., 2003. "Moving to greener pastures? Multinationals and the pollution haven hypothesis," Journal of Development Economics, Elsevier, vol. 70(1), pages 1-23, February.
    33. Ulrich Wagner & Christopher Timmins, 2009. "Agglomeration Effects in Foreign Direct Investment and the Pollution Haven Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 43(2), pages 231-256, June.
    34. Che, Yi & Du, Julan & Lu, Yi & Tao, Zhigang, 2015. "Once an enemy, forever an enemy? The long-run impact of the Japanese invasion of China from 1937 to 1945 on trade and investment," Journal of International Economics, Elsevier, vol. 96(1), pages 182-198.
    35. Lu, Yi & Tao, Zhigang, 2009. "Contract enforcement and family control of business: Evidence from China," Journal of Comparative Economics, Elsevier, vol. 37(4), pages 597-609, December.
    36. Suvajit Banerjee & Muntasir Murshed, 2020. "Do emissions implied in net export validate the pollution haven conjecture? Analysis of G7 and BRICS countries," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 12(3), pages 297-319.
    37. Jing Zhang & Xiaolan Fu, 2008. "FDI and environmental regulations in China," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 13(3), pages 332-353.
    38. Ren, Shenggang & Yuan, Baolong & Ma, Xie & Chen, Xiaohong, 2014. "International trade, FDI (foreign direct investment) and embodied CO2 emissions: A case study of Chinas industrial sectors," China Economic Review, Elsevier, vol. 28(C), pages 123-134.
    39. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
    40. Yu Hao & Yi-Ming Liu, 2015. "Has the development of FDI and foreign trade contributed to China’s CO 2 emissions? An empirical study with provincial panel data," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 76(2), pages 1079-1091, March.
    41. Cole, Matthew A., 2004. "Trade, the pollution haven hypothesis and the environmental Kuznets curve: examining the linkages," Ecological Economics, Elsevier, vol. 48(1), pages 71-81, January.
    42. Shahbaz, Muhammad & Kablan, Sandrine & Hammoudeh, Shawkat & Nasir, Muhammad Ali & Kontoleon, Andreas, 2020. "Environmental Implications of Increased US Oil Production and Liberal Growth Agenda in Post -Paris Agreement Era," MPRA Paper 99277, University Library of Munich, Germany, revised 19 Mar 2020.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wen Jun & Muhammad Zakaria & Syed Jawad Hussain Shahzad & Hamid Mahmood, 2018. "Effect of FDI on Pollution in China: New Insights Based on Wavelet Approach," Sustainability, MDPI, vol. 10(11), pages 1-20, October.
    2. Lutao Ning & Fan Wang, 2018. "Does FDI Bring Environmental Knowledge Spillovers to Developing Countries? The Role of the Local Industrial Structure," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(2), pages 381-405, October.
    3. Hao, Yu & Guo, Yunxia & Guo, Yitong & Wu, Haitao & Ren, Siyu, 2020. "Does outward foreign direct investment (OFDI) affect the home country’s environmental quality? The case of China," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 109-119.
    4. Demena, Binyam Afewerk & Afesorgbor, Sylvanus Kwaku, 2020. "The effect of FDI on environmental emissions: Evidence from a meta-analysis," Energy Policy, Elsevier, vol. 138(C).
    5. Zheng Fang & Bihong Huang & Zhuoxiang Yang, 2020. "Trade openness and the environmental Kuznets curve: Evidence from Chinese cities," The World Economy, Wiley Blackwell, vol. 43(10), pages 2622-2649, October.
    6. Lee, Sanghoon & Oh, Dae-Won, 2015. "Economic growth and the environment in China: Empirical evidence using prefecture level data," China Economic Review, Elsevier, vol. 36(C), pages 73-85.
    7. Liu, Yiming & Hao, Yu & Gao, Yixuan, 2017. "The environmental consequences of domestic and foreign investment: Evidence from China," Energy Policy, Elsevier, vol. 108(C), pages 271-280.
    8. Singhania, Monica & Saini, Neha, 2021. "Demystifying pollution haven hypothesis: Role of FDI," Journal of Business Research, Elsevier, vol. 123(C), pages 516-528.
    9. Liu, Liyun & Zhao, Zhenzhi & Su, Bin & Ng, Tsan Sheng & Zhang, Mingming & Qi, Lin, 2021. "Structural breakpoints in the relationship between outward foreign direct investment and green innovation: An empirical study in China," Energy Economics, Elsevier, vol. 103(C).
    10. Xindi Xu & Xinjun Wang, 2021. "The Spatial Correlation between Foreign Direct Investment and Air Quality in China and the Potential Channel," Sustainability, MDPI, vol. 13(11), pages 1-25, June.
    11. Imad Moosa, 2019. "The Environmental Effects of FDI: Evidence from MENA Countries," Working Papers 1321, Economic Research Forum, revised 21 Aug 2019.
    12. Yingqi Wei & Sasa Ding & Ziko Konwar, 2022. "The two faces of FDI in environmental performance: a meta-analysis of empirical evidence in China," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 20(1), pages 65-94, January.
    13. Shahbaz, Muhammad & Nasreen, Samia & Abbas, Faisal & Anis, Omri, 2015. "Does foreign direct investment impede environmental quality in high-, middle-, and low-income countries?," Energy Economics, Elsevier, vol. 51(C), pages 275-287.
    14. Natalia Zugravu-Soilita, 2017. "How does Foreign Direct Investment Affect Pollution? Toward a Better Understanding of the Direct and Conditional Effects," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(2), pages 293-338, February.
    15. Tao Ding & Yadong Ning & Yan Zhang, 2017. "The Contribution of China’s Outward Foreign Direct Investment (OFDI) to the Reduction of Global CO 2 Emissions," Sustainability, MDPI, vol. 9(5), pages 1-15, May.
    16. Dietzenbacher, Erik & Yan, Bingqian, 2024. "Explaining the direction of emissions embodied in trade from hypotheses based on country rankings11Funding information: Bingqian Yan received financial support from the National Natural Science Founda," Energy Economics, Elsevier, vol. 129(C).
    17. Saussay, Aurélien & Zugravu-Soilita, Natalia, 2023. "International production chains and the pollution offshoring hypothesis: An empirical investigation," Resource and Energy Economics, Elsevier, vol. 73(C).
    18. He, Jie, 2010. "What is the role of openness for China's aggregate industrial SO2 emission?: A structural analysis based on the Divisia decomposition method," Ecological Economics, Elsevier, vol. 69(4), pages 868-886, February.
    19. Shahbaz, Muhammad & Balsalobre, Daniel & Shahzad, Syed Jawad Hussain, 2018. "The Influencing Factors of CO2 Emissions and the Role of Biomass Energy Consumption: Statistical Experience from G-7 Countries," MPRA Paper 87456, University Library of Munich, Germany, revised 14 Jun 2018.
    20. Rongping Chang & Bei Wang & Yan Zhang & Lingxue Zhao, 2022. "Foreign Direct Investment and Air Pollution: Re-Estimating the “Pollution Haven Hypothesis” in China," Sustainability, MDPI, vol. 14(21), pages 1-20, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:streco:v:60:y:2022:i:c:p:482-495. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/525148 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.