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Journal ArticleDOI

Environmental regulation, hidden economy, and China's outward foreign direct investment

TL;DR: Wang et al. as mentioned in this paper investigated the scale of the hidden economy in 30 provinces and province-level municipalities in China in the period 2004 to 2015, and used the multiple indicators and multiple causes (MIMIC) model and the systematic generalized method of moments (GMM) test to analyze the impact of environmental regulation and hidden economy on China's OFDI.
Abstract: The need to balance economic growth and its environmental impact continues to be a serious issue in China. As environmental regulation in China increases in importance, it is critical to understand how it impacts economic growth drivers such as outward foreign direct investment (OFDI) to formulate effective policies. One consideration should be the hidden economy, which can weaken the effects of environmental regulation on OFDI. This study investigates the scale of the hidden economy in 30 provinces and province-level municipalities in China in the period 2004 to 2015. The study uses the multiple indicators and multiple causes (MIMIC) model and the systematic generalized method of moments (GMM) test to analyze the impact of environmental regulation and the hidden economy on China's OFDI. The results show that stronger environmental regulation promotes OFDI. However, the hidden economy inhibits China's OFDI, as the positive effects of environmental regulation that drive OFDI are distorted. From a regional perspective, stronger environmental regulation promotes OFDI as well, while the hidden economy inhibits it. The interaction between environmental regulation and the hidden economy also inhibits it significantly.
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Journal ArticleDOI
TL;DR: In this article, the authors evaluated the impact of outward foreign direct investment (OFDI), human well-being, and other macro indicators of the public sector on carbon footprint in newly industrialized economies that span the period 1990-2017.
Abstract: This study evaluates the impact of outward foreign direct investment (OFDI), human well-being, and other macro indicators of the public sector on carbon footprint. Empirical analysis has been carried out for newly industrialized economies that span the period 1990–2017. We used augmented mean group and bootstrap panel causality techniques to cogitate the cross-sectional dependence and country-specific heterogeneity. Based on cross-country analysis, study results show that growing OFDI reduces carbon footprint efficiently in Mexico and Turkey, human well-being decreases emissions in the Philippines, and urbanization reduces emissions in China. Further, technology reduces emissions in Malaysia and Turkey, trade openness reduces emissions in China and Malaysia, and natural resource rents reduce emissions in Indonesia and Mexico. In the case of panel analysis, the moderating role of OFDI with human well-being is contributing toward a sustainable environment. Moreover, the moderation of OFDI and urbanization has an insignificant impact on CFP. Findings depict that interaction terms of OFDI with technology and trade openness have a positive association with the environment quality. Finally, OFDI and natural resources have positive moderation on CFP. This study contributes to the existing literature by suggesting policy implications for a sustainable environment.

13 citations

Journal ArticleDOI
TL;DR: Wang et al. as discussed by the authors examined the causal relationship between air pollution (AP) and outward foreign direct investment (OFDI) in China by applying the bootstrap rolling-window full- and subsample Granger causality test in a sample from 2013 to 2022.
Abstract: This study examines the causal relationship between air pollution (AP) and outward foreign direct investment (OFDI) in China by applying the bootstrap rolling-window full- and subsample Granger causality test in a sample from 2013 to 2022. We find that AP negatively influenced OFDI in 2016, while this influence became positive at the end of 2019. The results confirm the coexistence of the pollution haven hypothesis, factor endowment hypothesis, and Porter hypothesis. In turn, OFDI negatively influenced AP in 2019, which proves the “composition effect” and “technique effect,” implying that OFDI brings better air quality by optimizing the economic structure and promoting green technology. However, this influence became positive in 2020, which is consistent with the “scale effect,” indicating that OFDI worsens air quality by expanding production. This research provides insights for the government to coordinate OFDI growth and carbon neutralization to achieve sustainable development. It also has implications for firms to reduce environmental costs through OFDI.

1 citations

Journal ArticleDOI
TL;DR: Wang et al. as discussed by the authors explored the effect and impact mechanism of environmental regulations on the outward foreign direct investment (OFDI) of enterprises by using data from the China Industrial Enterprise Database and the Directory of Overseas Investment Enterprises (Institutions).
Abstract: In the context of the new economic normal, environmental protection and economic growth have become the focus of academic attention. This paper explores the effect and impact mechanism of environmental regulations on the outward foreign direct investment (OFDI) of enterprises by using data from the China Industrial Enterprise Database and the Directory of Overseas Investment Enterprises (Institutions) for the years 2004 to 2010. The findings are summarised as follows. Firstly, environmental regulations have a significant positive effect on the OFDI of Chinese enterprises, and this result remains robust after considering the outcomes of robustness tests and endogeneity issues. Secondly, the promotion effect of environmental regulations on the OFDI of Chinese enterprises obviously differs across investment motivations and industry characteristics. Thirdly, productivity gains are important channels through which environmental regulations promote the OFDI of enterprises. These findings have great significance for the effective formulation of environmental regulatory policies and the stable development of the OFDI of Chinese enterprises.

1 citations

Journal ArticleDOI
TL;DR: In this paper , the impact of environmental regulation measures in the Yangtze River Basin on industrial pollution control was studied through empirical analysis, and the spatial eigenvector mapping (SEVM) method was used to explore the spatial impact of the environmental regulation on carbon emissions.
Abstract: The Yangtze River Basin occupies an important position in the overall layout of China’s economic development. However, due to the increasing water pollution, the environment of the Yangtze River Basin continues to deteriorate, which hinders the long-term development and sustainable development goals of the Yangtze River Economic Belt. Therefore, this study started from the perspective of the reduction of coordinated pollution carbon. Then, through empirical analysis, the impact of environmental regulation measures in the Yangtze River Basin on industrial pollution control was studied. At the same time, the spatial eigenvector mapping (SEVM) method was used to explore the spatial impact of environmental regulation on carbon emissions. The results showed that the increase in the intensity of environmental regulation would lead to the expansion of the hidden economy, which would lead to the effect of environmental regulation weakening. There was an inverted “U” relationship between per capita real gross domestic product (GDP) and environmental pollution indicators. In addition, the expansion of foreign trade in the Yangtze River Economic Belt hada less inhibitory effect on ecological environmental protection than a promotional one. At the same time, command-type environmental regulation had a “green paradox” effect on carbon emissions in the Yangtze River Basin. The carbon emission reduction effect of implicit environmental regulation was different under different levels of incentive-type environmental regulation. The research showed that the multi-agent governance model could be further constructed from the interaction between the environmental regulation system and the administrative management system. It had a good effect on the coordinated treatment of pollution reduction and carbon reduction under the “double carbon” goal.

1 citations

References
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Journal ArticleDOI
TL;DR: In this article, the authors develop a theoretical model to divide trade's impact on pollution into scale, technique and composition effects and then examine this theory using data on sulfur dioxide concentrations from the Global Environment Monitoring Project.
Abstract: This paper sets out a theory of how openness to international goods markets affects pollution concentrations. We develop a theoretical model to divide trade's impact on pollution into scale, technique and composition effects and then examine this theory using data on sulfur dioxide concentrations from the Global Environment Monitoring Project. We find international trade creates relatively small changes in pollution concentrations when it alters the composition, and hence the pollution intensity, of national output. Our estimates of the associated technique and scale effects created by trade imply a net reduction in pollutio n from these sources. Combining our estimates of scale, composition and technique effects yields a somewhat surprising conclusion: freer trade appears to be good for the environment.

1,916 citations

Journal ArticleDOI
TL;DR: In this article, the authors employ panel data models to study how environmental innovation by US manufacturing industries responded to changes in pollution abatement expenditures and regulatory enforcement during the period 1983 through 1992.

1,245 citations

Journal ArticleDOI
TL;DR: This paper performed an econometric analysis of the host country determinants of Chinese outward FDI in the period 2003-2006 and found that Chinese inward FDI is attracted to large markets, and to countries with a combination of large natural resources and poor institutions.

733 citations

Posted Content
TL;DR: In this paper, the authors identify four obstacles that may have impeded researchers'ability to find evidence in favor of the "pollution haven" hypothesis: 1) The possibility that some features of host countries, such as bureaucratic corruption, may deter inward foreign direct investment and also positively correlate with lax environmental standards.
Abstract: The"pollution haven"hypothesis refers to the possibility that multinational firms, particularly those engaged in highly polluting activities, relocate to countries with weaker environmental standards. Despite the plausibility and popularity of this hypothesis, there is little evidence to support it. The authors identify four obstacles that may have impeded researchers'ability to find evidence in favor of the"pollution haven"hypothesis: 1) The possibility that some features of host countries, such as bureaucratic corruption, may deter inward foreign direct investment and also be positively correlated with lax environmental standards. Omitting this information in statistical analyses may produce misleading results. 2) The possibility that country- or industry-level data, typically used in the literature, may have masked the effect at the firm level. 3) Difficulties associated with measuring environmental standards of the host countries. 4) Difficulties associated with the measuring the pollution intensity of the multinational firms. The authors attempt to surmount these obstacles by explicitly taking into account corruption in host countries and using a firm-level data set on investment projects in 24 transition economies. With these improvements, the authors find some support for the"pollution haven"hypothesis, but evidence is still weak and does not survive numerous robustness checks.

356 citations

Journal ArticleDOI
TL;DR: In this article, the authors examined how environmental regulation shapes the pattern of foreign direct investment (FDI) and assessed the pollution haven hypothesis, and found strong evidence that polluting industries tend to invest more in countries with laxer environmental regulations in terms of both the amount of investment (intensive margin) and the number of new foreign affiliates (extensive margin).

228 citations