Foreign Direct Investment Location Decision and Pollution: Evidence from Malaysia

Abdul Hamid Jaafar () and Md Hossain
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Abdul Hamid Jaafar: School of Economic Studies Faculty of Economics and Business Universiti Kebangsaan Malaysia 43600 UKM, Bangi Selangor Darul Ehsan Malaysia
Md Hossain: School of Economic Studies Faculty of Economics and Business Universiti Kebangsaan Malaysia 43600 UKM, Bangi Selangor Darul Ehsan Malaysia

Jurnal Ekonomi Malaysia, 2007, vol. 41, 135-145

Abstract: There is considerable development gap between regions in Malaysia. The objective of this paper is to examine the impact of regional environmental pollution condition on foreign direct investment location decision across regions in Malaysia. In this study, several regional environmental variables are included as detrminants of foreign direct investment location decision. The study uses state level data from 1995 to 2004 on a random effect panel regression model. Result from this study indicate that while positive economic circumstances attact foreign direct investment, negative environmental condition, especially air pollution, serve as push factors. This finding suggests that local regions should improve their environmetal condition in order to stand a better chance of attacting foreign as well as local invesment.

Date: 2007
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