Theoretical and Empirical Studies on FDI and Environmental Regulations

Abstract

If foreign firms do transfer advanced technology and management know-how to domestic firms, they will thereby help to reduce industrial pollution in developing countries since they are generally believed to be cleaner than the domestic counterparts. However, this idea is at odds with the, so-called, pollution haven hypothesis (PHH) that FDI may be attracted to developing countries by their less stringent environmental regulations.