Pollution Abatement Costs and Foreign Direct Investment Inflows to U.S. States: A Nonparametric Reassessment
Posted: 13 Mar 2007
Abstract
Keller and Levinson (2002) utilize state-level panel data on inflows of foreign direct investment along with an innovative measure of relative pollution abatement costs to assess the impact of environmental stringency on capital flows. Using standard parametric panel data models, the authors find moderate evidence that capital flows are sensitive to abatement costs. Using recently developed nonparametric methods, we assess the robustness of this conclusion. The nonparametric approach reveals that (i) some of the parametric results are not robust, (ii) the impact of relative abatement costs is heterogeneous across states and generally of smaller magnitude than previously suggested.
Keywords: Environmental Regulation, Foreign Direct Investment, Generalized Kernel Estimation
JEL Classification: C14, C33, F21, Q52
Suggested Citation: Suggested Citation