A review of cross-country studies on foreign direct investment, environmental regulations and the environment

Abstract

With the aim of providing policy guidance, this survey reviews the literature on the nexus between foreign direct investment (FDI), environmental regulations and environment, focusing on cross-country analysis. While the survey finds much empirical evidence in support of pollution haven hypothesis from the recent development of the literature, the deterrent effects of weak environmental regulations on FDI from certain countries, certain industries and certain multinational firms are also revealed, along with the contrasting environmental effects of inward FDI between developed countries and developing countries. Meanwhile, the survey identifies research gaps in the literature and provides important policy implications for developing countries.