Does Air Pollution Crowd Out Foreign Direct Investment Inflows? Evidence from a Quasi-natural Experiment in China

Weibing Li () and Kaixia Zhang ()
Additional contact information
Weibing Li: Huazhong University of Science and Technology
Kaixia Zhang: Huazhong University of Science and Technology

Environmental & Resource Economics, 2019, vol. 73, issue 4, No 17, 1387-1414

Abstract: Abstract This study investigates whether air pollution crowds out foreign direct investment in China. We use a regression discontinuity design based on the lower air pollution to the South of the Qinling Mountains–Huai River line because the government did not develop coal-based central heating networks there, contrary to north of the line. We observe that for every 1% increase in PM2.5 concentration, foreign direct investment flows decrease by 0.393%, and foreign direct investment stocks decrease by 0.015%. By tracing the potential mechanisms, we find that air pollution may exert a negative impact on foreign direct investment inflows through its impacts on the health risks of the labor force and health insurance spending of foreign firms.

Keywords: Huai River policy; Air pollution; Foreign direct investment; Regression discontinuity; Crowding-out effect; China (search for similar items in EconPapers)
JEL-codes: F21 P28 Q53 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://link.springer.com/10.1007/s10640-019-00329-8 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:enreec:v:73:y:2019:i:4:d:10.1007_s10640-019-00329-8

Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2

DOI: 10.1007/s10640-019-00329-8

Access Statistics for this article

Environmental & Resource Economics is currently edited by Ian J. Bateman

More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().