FDI and pollution havens: Evidence from the Norwegian manufacturing sector |
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| Institution: | 1. Southampton Solent Business School, Southampton Solent University, Sir James Matthews Building, Southampton SO14 0YN, UK;2. Bournemouth University, 189 Holdenhurst Road, Bournemouth BH8 8EB, UK;3. University of Stellenbosch, South Africa;1. Guangdong Provincial Key Laboratory of Urbanization and Geo-simulation, School of Geography and Planning, Sun Yat-sen University, Guangzhou, 510275, China;2. Department of Urban Studies and Planning, Massachusetts Institute of Technology, Cambridge, MA 02139 USA;1. College of Urban and Environmental Sciences, Peking University, Beijing 100871, China;2. Lincoln Institute Center for Urban Development and Land Policy, Peking University, China;1. Universitè de Pau et des Pays de l''Adour, CATT, Avenue Poplawski, 64000 Pau, France;2. Sciences Po Aix, CHERPA, 25 rue Gaston de Saporta, 13100 Aix-en-Provence, France |
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| Abstract: | This is an empirical study of the firm and country determinants of foreign direct investment (FDI) and how it is affected by the stringency of environmental regulations in host countries. We employ disaggregated data on sales by Norwegian multinationals' affiliates from 1999 to 2005 that allow such affiliates to be categorized as either efficiency-seeking (vertical) or market-seeking (horizontal) FDI. While the environmental stringency of a host country and its enforcement are found to have no effect on the average investment, we find a significant negative effect on multinationals with vertical motives. Compared to those located in lenient countries, the efficiency-seeking affiliates in more environmentally regulated countries receive less investment from their parent companies in terms of (i) equity capital, (ii) capital stock, and (iii) assets. We further find that the total exports from affiliates to parent companies in Norway decrease with the level of enforced environmental stringency in the host countries. |
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