| Abstract: | In an era of closer worldwide economic integration, the role that environmental regulations play in shaping a country's comparative advantage is greater than ever. This has led to fears that ‘dirty’ firms will relocate from developed to developing countries where environmental regulations may be less stringent – the so‐called pollution haven hypothesis. To date, however, there is little support for the existence of pollution havens despite anecdotal evidence and the theoretical predictions. In this paper we employ a unique industry‐level dataset for Japan and examine whether Japanese industries have relocated production to their ASEAN neighbours in response to the relative stringency of Japanese environmental regulations. Not only do we find no evidence for pollution‐haven‐consistent behaviour but also some indication that the complex relationship between the characteristics of Japanese dirty industries and environmental regulations may actually have reduced Japanese outward FDI to the Philippines. |
