Are Foreign Investors Attracted to Weak Environmental Regulations? Evaluating the Evidence from China

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dc.creatorDean, Judith M.
dc.creatorLovely, Mary E.
dc.creatorWang, Hua
dc.date2012-06-25T14:08:18Z
dc.date2012-06-25T14:08:18Z
dc.date2005-02
dc.date.accessioned2026-07-01T01:30:08Z
dc.descriptionOne of the most contentious debates today is whether pollution-intensive industries from rich countries relocate to poor countries with weaker environmental standards, turning them into pollution havens. Empirical studies to date show little evidence to support the pollution haven hypothesis, but suffer potentially from omitted variable bias, specification, and measurement errors. The authors estimate the strength of pollution-haven behavior by examining the location choices of equity joint venture (EJV) projects in China. They derive a location choice model from a theoretical framework that incorporates the firm's production and abatement decision, agglomeration, and factor abundance. The authors estimate conditional logit and nested logit models using new data sets containing information on a sample of EJV projects, effective environmental levies on water pollution, and estimates of Chinese pollution-intensity for 3-digit ISIC (International Standard Industrial Classification) industries. Results from 2,886 manufacturing joint venture projects from 1993-96 show that EJVs from all source countries go into provinces with high concentrations of foreign investment, relatively abundant stocks of skilled workers, concentrations of potential local suppliers, special incentives, and less state ownership. Environmental stringency does affect location choice, but not as expected. Low environmental levies are a significant attraction only for joint ventures in highly-polluting industries with partners from Hong Kong, Macao, and Taiwan (China). In contrast, joint ventures with partners from OECD sources are not attracted by low environmental levies, regardless of the pollution intensity of the industry. The authors discuss the likely role of technological differences in explaining these results.
dc.formatapplication/pdf
dc.formattext/plain
dc.identifierhttp://documents.worldbank.org/curated/en/2005/02/5625015/foreign-investors-attracted-weak-environmental-regulations-evaluating-evidence-china
dc.identifierhttps://hdl.handle.net/10986/8902
dc.identifierhttps://doi.org/10.1596/1813-9450-3505
dc.identifier.urihttp://hdl.handle.net/123456789/418673
dc.languageEnglish
dc.publisherWorld Bank, Washington, DC
dc.relationPolicy Research Working Paper No. 3505
dc.rightsCC BY 3.0 IGO
dc.rightshttp://creativecommons.org/licenses/by/3.0/igo/
dc.rightsWorld Bank
dc.subjectABATEMENT
dc.subjectABATEMENT COSTS
dc.subjectAIR
dc.subjectAIR POLLUTION
dc.subjectAIR QUALITY
dc.subjectALTERNATIVE APPROACH
dc.subjectCENTRAL PLANNING
dc.subjectCITIES
dc.subjectCONSTRUCTION
dc.subjectCORRUPTION
dc.subjectCOST MINIMIZATION
dc.subjectDATA SETS
dc.subjectDEMAND CURVE
dc.subjectDEVELOPED COUNTRIES
dc.subjectECONOMIC CENSUSES
dc.subjectECONOMIC COOPERATION
dc.subjectECONOMICS
dc.subjectELASTICITY
dc.subjectELASTICITY OF SUBSTITUTION
dc.subjectEMISSIONS
dc.subjectEMISSIONS STANDARDS
dc.subjectEMPIRICAL STUDIES
dc.subjectENVIRONMENTAL REGULATIONS
dc.subjectEQUILIBRIUM
dc.subjectEXPORTS
dc.subjectGDP
dc.subjectGDP PER CAPITA
dc.subjectINCOME
dc.subjectINDUSTRIAL POLLUTION
dc.subjectINNOVATION
dc.subjectINTERMEDIATE GOODS
dc.subjectINTERNATIONAL TRADE
dc.subjectLABOR COSTS
dc.subjectLABOR FORCE
dc.subjectLABOR PRODUCTIVITY
dc.subjectLEGAL FRAMEWORK
dc.subjectLOCAL AUTHORITIES
dc.subjectMAXIMUM LIKELIHOOD ESTIMATION
dc.subjectMONOPOLISTIC COMPETITION
dc.subjectNATURAL RESOURCES
dc.subjectNEGOTIATIONS
dc.subjectPARENTS
dc.subjectPER CAPITA INCOME
dc.subjectPOLICY RESEARCH
dc.subjectPOLLUTION
dc.subjectPOLLUTION ABATEMENT
dc.subjectPOLLUTION CONTROL
dc.subjectPOLLUTION FEES
dc.subjectPOLLUTION TAX
dc.subjectPOLLUTION TAXES
dc.subjectPRICE TAKERS
dc.subjectPRODUCERS
dc.subjectPRODUCTION FUNCTION
dc.subjectPRODUCTION TECHNOLOGY
dc.subjectPROFIT MAXIMIZATION
dc.subjectQUALITY STANDARDS
dc.subjectRENEWABLE RESOURCES
dc.subjectSERVICE PROVIDERS
dc.subjectSUPPLIERS
dc.subjectTAX REVENUES
dc.subjectTAX SUBSIDIES
dc.subjectTAXATION
dc.subjectTECHNOLOGICAL PROGRESS
dc.subjectTELECOMMUNICATIONS
dc.subjectTIME SERIES
dc.subjectTOBACCO
dc.subjectTRANSPORTATION
dc.subjectTREATIES
dc.subjectVALUE OF OUTPUT
dc.subjectVARIABLE COSTS
dc.subjectVARIABLE INPUTS
dc.subjectVENEZUELA
dc.subjectWAGES
dc.subjectWASTE
dc.subjectWASTEWATER
dc.subjectWATER POLLUTION
dc.subjectWEIGHT
dc.subjectWORKERS
dc.titleAre Foreign Investors Attracted to Weak Environmental Regulations? Evaluating the Evidence from China

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