Evaluating the Pollution Haven Hypothesis for he Chemical Industry

An Empirical Study

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Abstract

This research evaluates the Pollution Haven Hypothesis for the chemical sector across the globe. It does so by creating a regression model which incorporates five constructs (market potential, infrastructure, factor cost, governance factors and a measure of environmental stringency) to explain the variance of foreign direct investment (FDI) across countries specified for the chemical sector. The results are by no means unequivocally for or against a confirmation of the pollution haven hypothesis, but the evidence suggests a negative effect of the measure of environmental stringency when FDI is specified further to only the manufacture of chemical products and sampled by averaging as much annual FDI data as the dataset includes.

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