Strategic Environmental Policies in the Presence of Foreign Direct Investment

24 Pages Posted: 6 Aug 2001

See all articles by Sajal Lahiri

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics

M. Ozgur Kayalica

Istanbul Technical University - Department of Management Engineering

Date Written: July 2001

Abstract

We analyse strategic environmental standards in the presence of foreign direct investment (FDI). A foreign firm located in a host country competes with a domestic firm in another country to export a homogeneous good to a third country. We also extend the model to allow the number of FDI to be endogenous. When the number of foreign firms is exogenous, the FDI host country always applies stricter environmental regulation. However, under free entry and exit of foreign firms, the FDI host country may apply lower standards under both non-cooperative and cooperative equilibrium.

Keywords: Environment, emission permits, Foreign Direct Investment, trade, pollution

JEL Classification: F2, H2

Suggested Citation

Lahiri, Sajal and Kayalica, M. Ozgur, Strategic Environmental Policies in the Presence of Foreign Direct Investment (July 2001). FEEM Working Paper No. 55.2001. Available at SSRN: https://ssrn.com/abstract=278690 or http://dx.doi.org/10.2139/ssrn.278690

Sajal Lahiri (Contact Author)

Southern Illinois University Carbondale - Department of Economics ( email )

MC 415
1000 Faner Drive
Carbondale, IL 62901
United States

M. Ozgur Kayalica

Istanbul Technical University - Department of Management Engineering ( email )

34367 Istanbul
Turkey
+90 212 2912391 (Phone)
+90 212 2348097 (Fax)

HOME PAGE: http://kayalica.cjb.net/

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