4.0 Article

DEGREE OF STRINGENCY MATTERS: REVISITING THE POLLUTION HAVEN HYPOTHESIS BASED ON HETEROGENEOUS PANELS AND AGGREGATE DATA

Journal

MACROECONOMIC DYNAMICS
Volume 23, Issue 7, Pages 2675-2697

Publisher

CAMBRIDGE UNIV PRESS
DOI: 10.1017/S136510051700092X

Keywords

Foreign Direct Investment; Pollution Haven; Regulatory Stringency; Bayesian Shrinkage Estimator

Categories

Ask authors/readers for more resources

Empirical studies on the trade-environment nexus that use panel data face two simultaneous challenges. One is associated with the potential presence of unobserved cross-country heterogeneity, while the other is due to the use of aggregate data. In this paper, we apply both the dynamic fixed effects and iterative empirical Bayes estimators to show first that when country heterogeneity is accurately accounted for in the estimation, it is possible to obtain significant impacts of trade variables on the environment, even though we use aggregate data. Second, using both the empirical Bayes parameter estimates and indicators of stringency of environmental regulations, we show that at low levels of stringency, the probability of having pollution-intensive foreign direct investments (FDIs) increases with a decrease in stringency. However, at high levels of regulatory stringency, more stringent regulations may lead to more pollution-intensive FDIs. This implies that pollution havens may exist only if environmental regulations are very lax or nonexistent.

Authors

I am an author on this paper
Click your name to claim this paper and add it to your profile.

Reviews

Primary Rating

4.0
Not enough ratings

Secondary Ratings

Novelty
-
Significance
-
Scientific rigor
-
Rate this paper

Recommended

No Data Available
No Data Available