Environmental regulations and firm‐level FDI: Evidence from China's 11th 5‐year plan
Abstract This paper investigates the influence of environmental regulations on outward foreign direct investment (OFDI). We first develop a simple model to show that an increase in emission tax in the domestic market induces firm‐level foreign direct investment (FDI) activities. We next take advanta...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Wiley
2023-03-01
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| Series: | International Studies of Economics |
| Subjects: | |
| Online Access: | https://doi.org/10.1002/ise3.29 |
| _version_ | 1797854876552658944 |
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| author | Yong Tan Qing Shi Siyuan Xuan Guang Yang |
| author_facet | Yong Tan Qing Shi Siyuan Xuan Guang Yang |
| author_sort | Yong Tan |
| collection | DOAJ |
| description | Abstract This paper investigates the influence of environmental regulations on outward foreign direct investment (OFDI). We first develop a simple model to show that an increase in emission tax in the domestic market induces firm‐level foreign direct investment (FDI) activities. We next take advantage of China's 11th Five‐Year Plan as a quasi‐natural experiment, which imposed different pollution reduction targets across provinces, and examine its impact on firm‐level FDI activities. Our results indicate that more stringent environmental regulations encourage firm‐level FDI participation. Furthermore, (1) firms are more likely to carry out FDI in developing countries instead of developed ones; (2) Compared with distribution‐oriented FDI, firms are more likely to engage in production‐oriented FDI. All results remain robust after controlling for possible policy endogeneity, missing variables, and expectation effect issues, which provides positive support for the pollution haven hypothesis. |
| first_indexed | 2024-04-09T20:13:21Z |
| format | Article |
| id | doaj.art-8f2925c43ba24af4b2b3d020dd441c76 |
| institution | Directory Open Access Journal |
| issn | 2831-3224 |
| language | English |
| last_indexed | 2024-04-09T20:13:21Z |
| publishDate | 2023-03-01 |
| publisher | Wiley |
| record_format | Article |
| series | International Studies of Economics |
| spelling | doaj.art-8f2925c43ba24af4b2b3d020dd441c762023-03-31T13:40:16ZengWileyInternational Studies of Economics2831-32242023-03-01181215210.1002/ise3.29Environmental regulations and firm‐level FDI: Evidence from China's 11th 5‐year planYong Tan0Qing Shi1Siyuan Xuan2Guang Yang3Department of Internatinal Trade, School of International Economics & Trade Nanjing University of Finance and Economics Nanjing ChinaDepartment of International Trade, School of Economics Shanghai University Shanghai ChinaDepartment of International Trade, School of Business Nanjing University Nanjing ChinaSchool of International Economics Nankai University Tianjin ChinaAbstract This paper investigates the influence of environmental regulations on outward foreign direct investment (OFDI). We first develop a simple model to show that an increase in emission tax in the domestic market induces firm‐level foreign direct investment (FDI) activities. We next take advantage of China's 11th Five‐Year Plan as a quasi‐natural experiment, which imposed different pollution reduction targets across provinces, and examine its impact on firm‐level FDI activities. Our results indicate that more stringent environmental regulations encourage firm‐level FDI participation. Furthermore, (1) firms are more likely to carry out FDI in developing countries instead of developed ones; (2) Compared with distribution‐oriented FDI, firms are more likely to engage in production‐oriented FDI. All results remain robust after controlling for possible policy endogeneity, missing variables, and expectation effect issues, which provides positive support for the pollution haven hypothesis.https://doi.org/10.1002/ise3.2911th FYPenvironmental regulationsFDIpollution haven hypothesis |
| spellingShingle | Yong Tan Qing Shi Siyuan Xuan Guang Yang Environmental regulations and firm‐level FDI: Evidence from China's 11th 5‐year plan International Studies of Economics 11th FYP environmental regulations FDI pollution haven hypothesis |
| title | Environmental regulations and firm‐level FDI: Evidence from China's 11th 5‐year plan |
| title_full | Environmental regulations and firm‐level FDI: Evidence from China's 11th 5‐year plan |
| title_fullStr | Environmental regulations and firm‐level FDI: Evidence from China's 11th 5‐year plan |
| title_full_unstemmed | Environmental regulations and firm‐level FDI: Evidence from China's 11th 5‐year plan |
| title_short | Environmental regulations and firm‐level FDI: Evidence from China's 11th 5‐year plan |
| title_sort | environmental regulations and firm level fdi evidence from china s 11th 5 year plan |
| topic | 11th FYP environmental regulations FDI pollution haven hypothesis |
| url | https://doi.org/10.1002/ise3.29 |
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