US Environmental Regulation and FDI: Evidence from a Panel of US-Based Multinational Firms

Rema Hanna

American Economic Journal: Applied Economics, 2010, vol. 2, issue 3, 158-89

Abstract: This paper measures the response of US-based multinationals to the Clean Air Act Amendments (CAAA). Using a panel of firm-level data over the period 1966-1999, I estimate the effect of regulation on a multinational's foreign production decisions. The CAAA induced substantial variation in the degree of regulation faced by firms, allowing for the estimation of econometric models that control for firm-specific characteristics and industrial trends. I find that the CAAA caused regulated multinational firms to increase their foreign assets by 5.3 percent and their foreign output by 9 percent. Heavily regulated firms did not disproportionately increase foreign investment in developing countries. (JEL F23, K32, L51, Q52, Q53, Q58)

JEL-codes: F23 K32 L51 Q52 Q53 Q58 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/app.2.3.158
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Citations: View citations in EconPapers (138)

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