Strategic Environmental Policies in the Presence of Foreign Direct Investment |
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Authors: | Email author" target="_blank">M??gür?KayalicaEmail author Sajal?Lahiri |
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Institution: | (1) Department of Management Engineering, Istanbul Technical University, Istanbul, Turkey;(2) Department of Economics, Southern Illinois University Carbondale, Carbondale, IL 62901, USA |
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Abstract: | We analyze strategic environmental standards in the presence of foreign direct investment. A number of foreign firms located in a host country compete with a domestic firm in another country to export a homogeneous good to a third country. When the number of foreign firms is exogenous, the host country applies a stricter environmental regulation than the other producing country. However, under free entry and exit of foreign firms, the host country may apply a less severe standard under both non-cooperative and cooperative equilibrium. We also find that the nature market structure does not affect the equilibrium values of total pollution if export subsidies are also used.JEL Classification: F2, H2 |
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Keywords: | environment emission permits foreign direct investment trade pollution |
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