International production chains and the pollution offshoring hypothesis: An empirical investigation

Aurélien Saussay and Natalia Zugravu-Soilita

Post-Print from HAL

Abstract: Most analyses of the impact of heterogeneous environmental policy stringency on the location of industrial firms have considered the relocation of entire activities – the well-known pollution haven hypothesis. Yet international enterprises may decide to only offshore a subset of their production chain – the so-called pollution offshoring hypothesis (POH). We introduce a simple empirical approach to test the POH combining a comprehensive industrial mergers and acquisitions dataset, a measure of sectoral linkages based on input-output tables and an index score of environmental policy stringency. Our results confirm the impact of relative environmental policy stringency on firms' decisions to engage in cross-country M&As. Our findings also indicate that environmental taxation have a stronger impact on international investment decisions than standards-based policies. Further, we find that transactions involving a target firm operating in a sector upstream of the acquirer are more sensitive to environmental policy stringency, especially when that sector is highly pollution-intensive. This empirical evidence is consistent with the pollution offshoring hypothesis.

Keywords: Environmental regulation; FDI; Firm location; Global supply chain; Pollution offshoring (search for similar items in EconPapers)
Date: 2023
Note: View the original document on HAL open archive server: https://hal.science/hal-04106308v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published in Resource and Energy Economics, 2023, 73, ⟨10.1016/j.reseneeco.2023.101357⟩

Downloads: (external link)
https://hal.science/hal-04106308v1/document (application/pdf)

Related works:
Journal Article: International production chains and the pollution offshoring hypothesis: An empirical investigation (2023)
Working Paper: International production chains and the pollution offshoring hypothesis: an empirical investigation (2023)
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:hal:journl:hal-04106308

DOI: 10.1016/j.reseneeco.2023.101357

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().