The Effect of Environmental Regulation on the Locational Choice of Japanese Foreign Direct Investment

Colin Kirkpatrick and Kenichi Shimamoto ()

No 30584, Impact Assessment Research Centre (IARC) Working Papers from University of Manchester, Institute for Development Policy and Management (IDPM)

Abstract: This paper assesses the impact of environmental regulation in host countries on Japanese foreign direct investment (FDI) decision-making. It tests the pollution haven hypothesis using data on national environmental regulation standards and Japanese inward FDI in five dirty industries (iron and steel industry, non-ferrous metals industry, chemicals industry, paper and pulp industry, non-metallic products industry). The results do not support the pollution hypothesis. On the contrary, inward Japanese FDI appears to be attracted to countries which have committed themselves to a transparent and stable environment regulatory environment, suggesting that the quality of the regulatory framework in terms of its certainty and transparency has a greater influence on foreign investors' choice of location than the level of the environmental regulatory measures.

Keywords: Environmental Economics and Policy; International Relations/Trade (search for similar items in EconPapers)
Pages: 25
Date: 2005
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Journal Article: The effect of environmental regulation on the locational choice of Japanese foreign direct investment (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:idpmia:30584

DOI: 10.22004/ag.econ.30584

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