Foreign Direct Investments and Environmental Policies: A Meta-Analysis
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This study carries a meta-analysis of papers related to foreign direct investment (FDI) and environmental policy. The results firstly suggest that the use of government expenditure on environmental-related measures gives the highest probability of finding evidence for the pollution haven hypothesis (PHH). Secondly, it emerges that policies related to environmental suitability and FDI should be based on a top-down approach at country level instead of bottom-up strategies. Finally, we find that research papers that used new plant establishment as a proxy of FDI are more likely to support PHH as compared to those used the stock definition. The results are encouraging enough to be referred to in the context of designing suitable climate negotiation policies where increasing externalities are generated as pollutions from FDI. From the systemic quantitative review using meta-analysis, we propose a carbon tax at both regional and local scale, which will increase global welfare and address concerns related to sustainability.
KeywordsFDI PHH Environment Meta-analysis
JEL CodesQ56 B23 F35
This is a modified and updated version of our earlier paper presented in the seminar on “FDI: Issues and Policies” during 24 February 2018 hosted by the Centre for Policy Studies, IIT, Bombay. We would like to thank Forum for Global Knowledge Sharing (Knowledge Forum) for accepting our paper for the seminar and participants for constructive comments and suggestions during the presentation. We would like to thank Prof. K. L. Krishna, Prof. N. S. Siddharthan and Prof. K. Narayanan for their specific comments and suggestions that helped us in modifying the paper in its current form. Usual disclaimer applies.
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