MNE's location decision and environmental stringency, a PMG-ARDL approach.
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2022-07-14
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en
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Abstract
This paper examines the transfer of polluting activities by multinational enterprises (MNEs) towards countries with low environmental stringency—the so-called pollution havens. The empirical validity of the pollution haven hypothesis (PHH) across countries is examined using annual data of 117 countries between 1990 and 2014 using a Pooled Mean Group (PMG) ARDL approach. This entailed estimating a dynamic heterogeneous panel model followed by a Granger causality test. The results show a long-run causal influence of environmental stringency on inward FDI, which differs across GDP per capita panel groups. This indicates that lower host country environmental stringency attracts transfer of polluting activities. These findings further reinforce the validity of the PHH and the existence of pollution havens while also partly explaining the non-linear shape of the environmental Kuznets curve (EKC).
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Faculteit der Managementwetenschappen