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The Structure of UK Outbound FDI and Environmental Regulation

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  • Abay Mulatu

    (Coventry University)

Abstract

We study whether the pattern of outbound Foreign Direct Investment (FDI) is influenced by host countries’ environmental regulations. We employ a general empirical location model that captures interactions between industry attributes and host country characteristics in determining firm location. We use data on UK-based multinational activity in 64 countries and 23 industries over the period 2002–2006. Our results suggest a significant effect of environmental policy on the pattern of UK outbound FDI—a pollution haven effect. A one standard deviation increase in environmental laxity increases FDI (assets) in industries that are above-average pollution intensive by 28%.

Suggested Citation

  • Abay Mulatu, 2017. "The Structure of UK Outbound FDI and Environmental Regulation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(1), pages 65-96, September.
    • Handle: RePEc:kap:enreec:v:68:y:2017:i:1:d:10.1007_s10640-017-0145-4
    DOI: 10.1007/s10640-017-0145-4
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    1. Abay Mulatu & Reyer Gerlagh & Dan Rigby & Ada Wossink, 2010. "Environmental Regulation and Industry Location in Europe," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(4), pages 459-479, April.
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