Environmental Regulation and French Firms Location Abroad: An Economic Geography Model in an International Comparative Study

14 Pages Posted: 2 Sep 2013

See all articles by Sonia Ben Kheder

Sonia Ben Kheder

Université Paris I Panthéon-Sorbonne

Natalia Zugravu-Soilita

University of Versailles Saint-Quentin-en-Yvelines

Date Written: March 15, 2012

Abstract

In this study, we re-examine the pollution haven hypothesis by a fresh take on both its theoretical and empirical aspects. The originality of our work is twofold. First, we apply an economic geography model with the aim of deriving a rigorous specification for the impact of environmental regulation on firms' location choice. Second, we test a conditional logit model using French firm-level data in an international comparative study. We confirm evidence of a strong pollution haven effect for our pooled sample of countries receiving French direct investments. However, through a sensitivity analysis, we validate this finding for developed countries and most of emerging economies and Central and Eastern European countries, but not for most countries of the Commonwealth of Independent States and developing countries, where a more stringent environmental regulation seems to attract investments. Furthermore, we highlight a forward looking behavior of firms, in terms of their location decision-making.

Keywords: FDI, Economic geography, Environmental regulation, Pollution haven

JEL Classification: F12, F18, Q28

Suggested Citation

Ben Kheder, Sonia and Zugravu-Soilita, Natalia, Environmental Regulation and French Firms Location Abroad: An Economic Geography Model in an International Comparative Study (March 15, 2012). Ecological Economics, Vol. 77, 2012, Available at SSRN: https://ssrn.com/abstract=2319289

Sonia Ben Kheder

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005
France

Natalia Zugravu-Soilita (Contact Author)

University of Versailles Saint-Quentin-en-Yvelines ( email )

47 Bd Vauban
Guyancourt, 78280
France

HOME PAGE: http://sites.google.com/site/nataliazugravu

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