Environmental regulation and foreign direct investment: Evidence from China's outward FDI

Yan Dong, Jinhuan Tian and Jingjing Ye

Finance Research Letters, 2021, vol. 39, issue C

Abstract: This paper investigates whether environmental regulation affects patterns of foreign direct investment (FDI) and how such patterns change across time, industries, and destination countries. We examine the pattern of Chinese FDI outflow over 2008–2018 and apply difference-in-differences estimation to circumvent other potential confounders. As a result, we find evidence that host countries with more relaxed environmental regulations attract foreign direct investment from polluting industries. However, the preference for destinations with lax regulations has been weakened among China's multinational enterprises since the promotion of the “Belt and Road Initiative” began in 2013.

Keywords: Foreign direct investment; Environmental regulation; Difference-in-differences estimation (search for similar items in EconPapers)
JEL-codes: F21 Q53 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:39:y:2021:i:c:s1544612320306188

DOI: 10.1016/j.frl.2020.101611

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