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Abstract

We examine the impact of environmental policy on location decision, the outflow of “dirty” Foreign Direct Investment (FDI). We also examine the impact of “dirty” FDI in host countries, on annual CO2 total emission; total emission of known particulate matters; rising temperature; and total energy use. Using disaggregated FDI data, panel data regression, we found that, “dirty” FDI outflow is positively correlated with environmental policy in eleven OECD countries. But FDI inflow is not significant in explaining the level of pollution and energy use in fourteen non-OECD countries.

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