relocation decisions

This paper estimates the effect of changing environmental standards on patterns of international investment. The analysis advances the existing literature in three ways. First, we avoid comparing different countries by examining foreign direct investment (FDI) to the U.S. and differences in pollution abatement costs among U.S. states. Data on environmental costs in U.S. states are more comparable than that for different countries, and U.S. states are more similar in other difficult-to-measure dimensions. Second, we account for differences in states' industrial compositions, an acknowledged problem for earlier studies. Third, we employ an 18-year panel of relative abatement costs, allowing us to control for unobserved state characteristics. We find robust evidence that pollution costs have had moderate deterrent effects on foreign investment.

This paper estimates the extent to which changing environmental standards have altered patterns of international investment. Our analysis goes beyond the existing literature in three ways. First, we avoid comparing regulations in different countries by using data on inward foreign direct investment (FDI) to the U.S. and on differences in the regulatory stringency of U.S. states. This approach has the advantage that data on environmental stringency in U.S. states are more comparable than that for different countries, and that U.S. states are more similar than countries in other difficult-to-measure dimensions. Second, our measure of environmental stringency accounts for differences in states' industrial compositions, an acknowledged problem for earlier studies. Third, we employ a panel of annual measures of relative regulatory stringency from 1977 to 1994, allowing us to control for unobserved state characteristics that may be correlated with both FDI and compliance costs. We find some ...

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How to address the link between environmental regulation and trade was an important part of discussions at the Doha Ministerial of the World Trade Organization in November 2001. Trade ministers agreed to launch negotiations on trade and the environment, including clarification of WTO rules. This paper addresses an important part of the background context for deciding whether or how to link trade agreements to the environment, from a developing country perspective. We ask the question whether environmental regulations affect exports of pollution- intensive or "dirty" goods in 24 countries between 1994 and 1998. Based on a Heckscher-Ohlin-Vanek (HOV) model, net exports in five pollution- intensive industries are regressed on factor endowments and measures of environmental standards (legislation in force). The results suggest that, if country heterogeneity such as enforcement of environmental regulations is controlled for, more stringent environmental standards imply lower net exports of metal mining, nonferrous metals, iron and steel and chemicals. Moreover, we find that a trade agreement on a common environmental standard will cost a non-OECD country substantially more than an OECD country. Developing countries will, on average, reduce exports of the five pollution- intensive products by 0.37 percent of GNP. This represents 11 percent of annual exports of these products from the 24 studied countries. JEL Classification: F18, O13, O19 Corresponding author: Tsunehiro Otsuki, E-mail address: totsuki@worldbank.org, Address: 1818 H Street NW, Washington DC 20433, USA, Phone number: (202) 473-8095, Fax number: (202) 5221159. The authors are grateful for the useful comments from attendees at a World Bank Trade Seminar held on June 19, 2001. The authors are also grateful for ...

This paper explores the relationship between environmental protection and international capital movements, when tax policy is endogenous (through voting). A two-period general equilibrium model of a small open economy is specified to compare the effects of two different constitutions (commitment or no commitment in tax policy), as well as income inequality. Under the commitment regime, the equilibrium is characterised by a lower labour tax, higher environmental tax and less capital moving abroad than in the no-commitment equilibrium. Furthermore, given the degree of commitment, more equal societies are characterised by tougher environmental policy and less capital moving abroad

Most of papers searching for pollution havens focus on the fear that environmental regulation may reduce net exports in the manufacturing sector or attractiveness of regulated countries, without concern to the environment. In our view, these analyses are incomplete because a fundamental related issue consists in determining if such pollution havens represent a threat to the environment by increasing pollution emissions, or at the contrary contribute to the reduction of emissions in host countries. In this work, we provide an exhaustive empirical analysis to clearly disentangle each relationship between foreign direct investment, environmental regulation and pollution, and to shed new light on the environmental impact of pollution havens. Using a consistent data set on French FDI ‡ows at a disaggregate sector-level, in a mix of developing, transition, emerging and developed countries for years 1999-2003, we estimate a system of three simultaneous equations to model the determination of FDI, taking into account the endogeneity of environmental policy and CES. University of Paris 1 Panthéon-Sorbonne. 1 considering the impact of FDI and regulation on pollution. Results con…rm recent works detecting a negative impact of environmental regulation on FDI location when taking into account the endogeneity of environmental regulation. This one is re‡ected by a decreasing impact of FDI on environmental policy. Moreover, French manufacturing FDI seems to increase the pollution emissions in host countries, although they reduce their pollution intensity.

Association Meetings in Washington D.C. for helpful comments. We are indebted to Robert Deacon for providing the lead data. Qiu is grateful for financial support by Hong Kong Government RGC Sustainable development has been a popular buzzword amongst policymakers and economists for over a decade. Although a key tenet of maintaining a sustainable development path for many economies rests on attracting mobile capital, theoretical and empirical evidence into the institutional policies that attract factors remains largely unresolved. This paper takes a positive look at the determinants of attracting capital with particular attention paid to intellectual property rights and environmental regulations. JEL Classification: F23, O34, Q28 Inducing economies to follow a sustainable development trajectory has been an important global policy objective since delegations from 178 countries met in Rio de Janeiro during the first two weeks of June 1992. The meeting, known popularly as the Earth Summit of 1992, was the culmination of more than two decades of debate concerning the relationship

Deepening global trade and investment integration holds the promise of more rapid increases in standards of living around the world, particularly in developing countries. Greater openness and expanded trade, partly attributable to the Uruguay Round, contributed to new opportunities for growth. Trade and incomes of developing countries grew during the 1990s at twice the rate of the previous decade, and those developing countries that deepened their integration with the global economy have seen their incomes rise at more than three times the pace of those that did not (Collier and Dollar forthcoming). The challenge ahead is to expand those opportunities

methods. We have benefited by helpful suggestions and insights from Lee Branstetter, Judith Dean, Devashish Mitra, and seminar participants at the NBER China Working Group Meetings, the University of Nottingham, and the 2010 AEA meetings. Deeper international integration through an inflow of foreign direct investment alters domestic labor markets, whether by shifting the labor demand curve or by increasing the elasticity of demand for domestic workers. This paper uses the location choices of multinational firms investing in China as a window into the relationship between foreign investment and hostcountry labor demand. With data on 2884 manufacturing equity joint venture projects in China during 1993-1996, we investigate the extent to which an investor’s sensitivity to wages depends on the skill intensity of the activity, product market competition, and source country development level. Using a control function technique for conditional logit developed by Petrin and Train (2005, 2006), we find a significant, elastic response of capital to wages; ceteris paribus, investors are attracted to locations with low wages. Moreover, investors involved in the least skill intensive activities exhibit the most wage sensitivity. The Broda-Weinstein (2006)