Location choice of FDI firms and environmental regulation reforms in China

Liguo Lin () and Wei Sun ()
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Liguo Lin: Shanghai University of Finance and Economics
Wei Sun: Shanghai University of Finance and Economics

Journal of Regulatory Economics, 2016, vol. 50, issue 2, No 4, 207-232

Abstract: Abstract By examining the data on 13,663 newly established FDI firms and the environmental regulation reforms between 2000 and 2010, this paper studies whether foreign investors in China exhibit pollution haven behavior. Our analyses indicate that fewer FDI firms locate in provinces with more stringent environmental regulations (i.e., with higher pollution levy rates). Consistent results are found when we examine the individual firm’s location choice decision. We further find that firms’ location patterns respond to the changes in environmental regulations. In particular, their pollution haven behavior becomes more significant when the changes bring greater inter-provincial differences in environmental stringency.

Keywords: Location choice; FDI; Environmental regulation; China (search for similar items in EconPapers)
JEL-codes: C33 K32 Q58 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (24)

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DOI: 10.1007/s11149-016-9303-9

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