We study whether the pattern of outbound Foreign Direct Investment (FDI) is influenced by host countries’ environmental regulations. We employ a general empirical location model that captures interactions between industry attributes and host country characteristics in determining firm location. We use data on UK-based multinational activity in 64 countries and 23 industries over the period 2002-2006. Our results suggest a significant effect of environmental policy on the pattern of UK outbound FDI – a pollution haven effect. A one standard deviation increase in environmental laxity increases FDI (assets) in industries that are above-average pollution intensive by 28%.
Bibliographical noteThe final publication is available at Springer via http://dx.doi.org/10.1007/s10640-017-0145-4
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)