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Emission reduction and foreign direct investment nexus in China

Yuan Xu, Yanrui Wu and Yongli Shi

Journal of Asian Economics, 2021, vol. 74, issue C

Abstract: This paper employs a difference-in-difference-in-difference approach to examine the emission reduction and foreign direct investment nexus in China. It combines a firm-level dataset with emission reduction target statistics at city-level. The findings indicate that stringent environmental regulation is associated with the fall of the output of foreign firms in general and the shrinking of pollution-intensive industries in cities with heavy emission reduction pressure in particular. It is also shown that the location choice of foreign investment changes as emission reduction targets at city-level vary. Finally it is found that environmental regulation helps improve the structure of foreign direct investment and hence contributes to industrial upgrading in the economy.

Keywords: Emission reduction; Foreign direct investment; Environmental regulation; DDD method; China (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.asieco.2021.101305

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