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| Publications [#164691] of Christopher D. Timmins
Journal Articles
- Ulrich J. Wagner and Christopher D. Timmins, Agglomeration Effects in Foreign Direct Investment and the Pollution Haven Hypothesis,
Environmental and Resource Economics, vol. 43 no. 2
(June, 2009),
pp. 231--256, ISSN 09246460 [login.aspx]
(last updated on 2009/10/26)
Abstract:
Does environmental regulation impair international competitiveness of pollution-intensive industries to the extent that they relocate to countries with less stringent regulation, turning those countries into "pollution havens"? We test this hypothesis using panel data on outward foreign direct investment {(FDI)} flows of various industries in the German manufacturing sector and account for several econometric issues that have been ignored in previous studies. Most importantly, we demonstrate that externalities associated with FDI agglomeration can bias estimates away from finding a pollution haven effect if omitted from the analysis. We include the stock of inward FDI as a proxy for agglomeration and employ a GMM estimator to control for endogenous time-varying determinants of FDI flows. Furthermore, we propose a difference estimator based on the least polluting industry to break the possible correlation between environmental regulatory stringency and unobservable attributes of FDI recipients in the cross-section. When accounting for these issues we find robust evidence of a pollution haven effect for the chemical industry.
Keywords:
Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling Q530, Chemicals; Rubber; Drugs; Biotechnology L650, Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products O130, Environmental Economics: Government Policy Q580, Multinational Firms; International Business F230, Other Production and Pricing Analysis R320
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