Green Havens and Pollution Havens

26 Pages Posted: 30 Oct 2012

Multiple version iconThere are 2 versions of this paper

Date Written: October 29, 2012

Abstract

We test for pollution haven effects in outward foreign direct investment (FDI) for different sectors using a comprehensive and exhaustive dataset for outward FDI from the Netherlands, one of the most environmentally stringent countries and a major source of global FDI. Our evidence suggests that in the sectors natural resources extraction and refining, construction, retail, food processing, beverages and tobacco, and utilities, a less stringent environmental policy in the host country significantly attracts FDI. What is important for these pollution haven effects is not only regulation but also enforcement of environmental policy. In contrast to earlier results, it is not only footloose industries that display pollution haven effects, but also the traditional pollution-intensive industries. But for the sectors machines, electronics and automotive and transportation and communication a more stringent and better enforced environmental policy attracts more FDI as this may help their reputation for sustainable management and CSR. These sectors display green haven effects. These findings have important implications for the sector distribution of FDI in destination countries.

Keywords: pollution haven, green haven, FDI, environmental policy, regulation, enforcement, strategic effects, footloose industries, CSR

JEL Classification: F18, F23, F13, Q50

Suggested Citation

Poelhekke, Steven and van der Ploeg, Frederick, Green Havens and Pollution Havens (October 29, 2012). De Nederlandsche Bank Working Paper No. 353, Available at SSRN: https://ssrn.com/abstract=2168237 or http://dx.doi.org/10.2139/ssrn.2168237

Steven Poelhekke (Contact Author)

University of Auckland ( email )

Auckland
New Zealand

HOME PAGE: http://https://sites.google.com/site/stevenpoelhekke/

Frederick Van der Ploeg

University of Oxford ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

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