Pollution Abatement Costs and Foreign Direct Investment Inflows to U.S. States: A Nonparametric Reassessment

Posted: 13 Mar 2007

See all articles by Daniel J. Henderson

Daniel J. Henderson

University of Alabama; Institute for the Study of Labor (IZA)

Daniel L. Millimet

Southern Methodist University (SMU) - Department of Economics; IZA Institute of Labor Economics

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

Henderson, Daniel J. and Millimet, Daniel L., Pollution Abatement Costs and Foreign Direct Investment Inflows to U.S. States: A Nonparametric Reassessment. Review of Economics and Statistics, Vol. 89, pp. 178-183, 2007, Available at SSRN: https://ssrn.com/abstract=968293

Daniel J. Henderson (Contact Author)

University of Alabama ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States
205-348-8991 (Phone)

HOME PAGE: http://cba.ua.edu/~djhender

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/index_html?lang=en&mainframe=http%3A//www.iza.org/en/webcontent/personnel/photos/

Daniel L. Millimet

Southern Methodist University (SMU) - Department of Economics ( email )

Box 750496
Dallas, TX 75275
United States
214-768-3269 (Phone)
214-768-1821 (Fax)

HOME PAGE: http:\\www.smu.edu\~millimet

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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