Abstract
On the basis of previous studies on the relations among foreign direct investment (FDI), environmental regulation, and environmental pollution, this work uses provincial panel data from 2000 to 2014 to study the effects of FDI and environmental regulation on environmental pollution by applying the panel-corrected standard error (PCSE) method. This paper then utilizes environmental regulation as the threshold variable to estimate the threshold effects of environmental regulation on FDI’s influence on environmental pollution in a threshold regression model for the eastern, central, and western regions of China. The results show that stricter environmental regulation can substantially reduce the pollution in each region. FDI can decrease environmental pollution in the eastern and central regions, but it can increase pollution in the western region. There are double-threshold effects of environmental regulation on the effects of FDI on environmental pollution in each region. When the environmental regulation level is between the first threshold and the second threshold, FDI can decrease environmental pollution much more in the eastern and central regions and increase environmental pollution much less in the western region.
Similar content being viewed by others
References
Antweiler W, Copeland BR, Taylor MS (2001) Is free trade good for the environment? Am Econ Rev 4:877–908
Baek J, Koo WW (2009) A dynamic approach to the FDI-environment nexus: the case of China and India. J E Asian Econ Integr 2:85–106
Bao Q, Chen YY, Song LG (2010) Is there an inverted U-shaped curve relationship between foreign investment and host country’s environmental pollution? J World Econ 1:3–17 (in Chinese)
Barro RJ, Lee JW (1993) Losers and winners in economic growth. World Bank Econ Rev 1:267–297
Bhattarai M, Hammig M (2001) Institutions and the environmental Kuznets curve for deforestation: a cross-country analysis for Latin America, Africa and Asia. World Dev 6:995–1010
Cao X, Wang P, Zhu B (2018) Has foreign direct investment increased air pollution in China? A hierarchical linear model approach. Nat Hazards 2:659–669
Chen G (2009) The competition for FDI, environment regulation and pollution haven: reflection on Chinese decentralization. World Econ Stud 6:3–7 (in Chinese)
Chen YY, Li KW (2010) China industry SO2 emission intensity factor decomposition and its influencing factors: Based on the analysis of FDI industry forward and backward Linkages. Manag World 3:14–21 (in Chinese)
Chen Y, Jin GZ, Kumar N, Shi G (2013) The promise of Beijing: evaluating the impact of the 2008 Olympic games on air quality. J Environ Econ Manag 3:424–443
Chen HY, Hao Y, Li JW, Song XJ (2018) The impact of environmental regulation, shadow economy, and corruption on environmental quality: theory and empirical evidence from China. J Clean Prod 195:200–214
Cheng ZH, Li LS, Liu J (2018) The spatial correlation and interaction between environmental regulation and foreign direct investment. J Regul Econ 2:124–146
Chung S (2014) Environmental regulation and foreign direct investment: evidence from South Korea. J Dev Econ 108:222–236
Cole MA (2004) Trade, the pollution haven hypothesis and the environmental Kuznets curve: examining the linkages. Ecol Econ 1:71–81
Cole MA, Elliott RJR, Okubo T, Zhou Y (2013) The carbon dioxide emissions of firms: a spatial analysis. J Environ Econ Manag 2:290–309
Copeland BR, Taylor MS (2003) Trade and the environment: theory and evidence. Can Public Pol 3:339–365
Dean JM, Lovely ME, Wang H (2009) Are foreign investors attracted to weak environmental regulations? Evaluating the evidence from China. J Dev Econ 1:1–13
Deng HH, Sang BC (2015) Fiscal decentralization, environmental regulation and FDI competition among local governments. J Shanghai Univ Fin Econ 3:9–88 (in Chinese)
Ederington J, Levinson A, Minier J (2004) Trade liberalization and pollution havens. Adv Econ Anal Plo 2:1330–1330
Elliott RJR, Zhou Y (2013) Environmental Regulation induced foreign direct investment. Environ Resour Econ 55(1):141–158
Frankel JA (2003) The environment and globalization. Nber Work Pap 2:161–210
Fu SX, Zhang KY, Zhang WB (2011) Environmental regulation and the effect of “pollution haven” on regional industrial layout of China. J Shanxi Univ Fin Econ 7:8–14 (in Chinese)
Gentry BS (2000) Foreign direct investment: boon or bane for the environment?
Gray WB, Shadbegian RJ (2004) “Optimal” pollution abatement—whose benefits matter, and how much? J Environ Econ Manag 3:510–534
Grossman GM, Krueger AB (1992) Environmental impacts of a North American free trade agreement. Soc Sci Electron Publish 2:223–250
Guo HY, Han LY (2008) Foreign direct investment, environmental regulation and environmental pollution. J Int Trade 8:111–118 (in Chinese)
Guo JW, Tao F (2009) Agglomeration effects, environmental regulation policy and foreign direct investment location choice: according to the new economic geography. Ind Econ Res 4:29–37 (in Chinese)
Hansen BE (1999) Threshold effects in non-dynamic panels: estimation, testing, and inference. J Econ 93:345–368
Hansen BE (2000) Sample splitting and threshold estimation. Econometrica 68:575–603
Hao Y, Deng YX, Lu ZN, Chen H (2018) Is environmental regulation effective in China? Evidence from city-level panel data. J Clean Prod 188:966–976
He J (2006) Pollution haven hypothesis and environmental impacts of foreign direct investment: the case of industrial emission of sulfur dioxide (SO2) in Chinese provinces. Ecol Econ 1:228–245
He K (2014) Environmental regulation intensity, industry heterogeneity and China’s industrial total factor of carbon emission performance. Forum Sci Techno China 4:62–67 (in Chinese)
Hong Q, Zhang SX (2013) An empirical analysis on relation between FDI and environmental pollution in Jilin Province. J Ind Techno Econ 4:136–140 (in Chinese)
Huang J (2010) Empirical investigation on foreign direct investment and environmental pollution: a simultaneous equations approach. World Econ Stud 2:80–86 (in Chinese)
Huang M (2015) Relation among economic growth, foreign direct investment and environmental pollution based on provincial panel 2003–2012. Resour Ind 1:92–97 (in Chinese)
Ji ZY, Mao J, Lai XF (2015) Study on the effect of FDI on environmental pollution in China: an empirical test with the panel data model. World Econ Stud 3:56–64 (in Chinese)
Kim MH, Adilov N (2012) The lesser of two evils: an empirical investigation of foreign direct investment-pollution tradeoff. Appl Econ 20:2597–2606
Kumar N, Foster AD (2009) Air quality interventions and spatial dynamics of air pollution in Delhi and its surroundings. Int J Environ Waste Manag 4:85–111
Langpap C, Shimshack JP (2010) Private citizen suits and public enforcement: substitutes or complements. J Environ Econ Manag 3:235–249
Leng YL, Xian GM, Du SZ (2015) Foreign direct investment and haze pollution: an empirical analysis based on provincial panel data. J Int Trade 12:74–84 (in Chinese)
Letchumanan R, Kodama F (2000) Reconciling the conflict between the “pollution-haven” hypothesis and an emerging trajectory of international technology transfer. Res Policy 1:59–79
Li ZH, Liu HH (2011) FDI, technology progress and emission of CO2: evidence from Chinese provincial data. Stud Sci Sci 10:1495–1503 (in Chinese)
Li S, Angelino A, Yin H, Spigarelli F (2017) Determinants of FDI localization in china: a county-level analysis for the pharmaceutical industry. Int J Environ Res Public Health 9:985
Liang F (2014) Does foreign direct investment harm the host country’s environment? Evidence from China. Curr Top Manag 17:105–121
Lin JH, Liu Y (2013) Endogenous environmental regulations: retesting of pollution haven hypothesis in China. Chin J Popul Resour Environ 1:13–18 (in Chinese)
Lin L, Sun W (2016) Location choice of FDI firms and environmental regulation reforms in China. J Regul Econ 2:207–232
List JA (2001) US county-level determinants of inbound FDI: evidence from a two-step modified count data model. Int J Ind Organ 6:953–973
List JA, Co CY (2000) The effects of environmental regulations on foreign direct investment. J Environ Econ Manag 1:1–20
Liu JM, Chen G (2008) An empirical analysis on impact of environmental regulations upon distribution of FDI. China Soft Sci 11:102–107 (in Chinese)
Liu ZZ, Chen G (2009) Environmental regulations and location distribution of foreign direct investment: empirical study based on urban panel data. J Int Trade 3:61–69 (in Chinese)
Liu QQ, Wang SJ, Zhang WZ, Zhan DS, Li JM (2018) Does foreign direct investment affect environmental pollution in China’s cities? A spatial econometric perspective. Sci Total Environ 613–614:521–529
Lu DX, Liu XM, Liu CM (2010) The empirical analysis of the influence of environmental regulation on foreign direct investment in China. Shangdong Econ 1:86–90 (in Chinese)
Lu JY, Yang J, Shao HY (2014) FDI, human capital and environmental pollution in china: a quantile regression analysis based on panel data of 249 cities. J Int Trade 4:118–125 (in Chinese)
Ma L, Liu WD, Liu Y (2003) The mechanism analysis of FDI impact on regional resource and environment. China Soft Sci 10:129–132 (in Chinese)
Ma JQ, Guo JJ, Liu XJ (2010) Water quality evaluation model based on principle component analysis and information entropy: application in Jinshui River. J Resour Ecol 3:249–252 (in Chinese)
Manderson E, Kneller R (2012) Environmental regulations, outward FDI and heterogeneous firms: are countries used as pollution havens? Environ Resour Econ 3:317–352
Mert M, Boluk G (2016) Do foreign direct investment and renewable energy consumption affect the CO2 emissions? New evidence from a panel ARDL approach to Kyoto Annex countries. Environ Sci Pollut Res 21:21669–21681
Mulatu A (2017) The structure of UK outbound FDI and environmental regulation. Environ Resour Econ 1:65–96
Naughton HT (2014) To shut down or to shift: multinationals and environmental regulation. Ecol Econ 102:113–117
Panayotou T (2000) Globalization and environment. CID working papers
Peng WB, Li HK (2016) On relations between threshold effect, environmental regulation and pollution enterprise: based on nonlinear threshold test of panel data of cities in Hunan Province. J Hunan Univ Sci Techno 1:98–103 (in Chinese)
Perkins R, Neumayer E (2009) Transnational linkages and the spillover of environment-efficiency into developing countries. Glob Environ Chang 7:375–383
Porter ME, Linde CL (1995) Toward a new conception of the environment-competitiveness relationship. J Econ Perspect 9:97–118
Qi JH, Ju L (2007) An empirical analysis on environmental regulation and FDI location: co-integration and granger test based on China’s data of 1985–2004. Fin Trade Res 3:10–15 (in Chinese)
Saboori B, Sulaiman J, Mohd S (2012) Economic growth and CO2 emissions in Malaysia: a cointegration analysis of the Environmental Kuznets Curve. Energy Policy 4:184–191
Su ZD, Zhou WQ (2010) Dynamic Effect of FDI on the environment and the regional differential in China: heterogeneity analysis based on the panel data by province and dynamic panel data model. World Econ Stud 6:63–67 (in Chinese)
United Nations Conference on Trade and Development (2016) World Investment Report 2016. Available online http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=1555. Accessed 22 Jun 2016
Walter I, Ugelow JL (1979) Environmental policies in developing countries. Ambio 8:102–109
Wang H, Jin Y (2007) Industrial ownership and environmental performance: evidence from China. Environ Resour Econ 3:255–273
Wang H, Wheeler D (2005) Financial incentives and endogenous enforcement in China’s pollution levy system. J Environ Econ Manag 1:174–196
Wang X, Zhang WJ (2011) The regional Differences between environmental regulation, economic structure and industrial pollution in China. Res Fin Econ Issues 11:23–30 (in Chinese)
Wang J, Wei W, Deng HH (2017) Will fiscal decentralization influence FDI inflows? A spatial study of Chinese cities. Emerg Mark Financ Trade 9:1988–2000
Wu L, Li GH, Li XF (2010) China’s environmental regulation and industry entry of FDI enterprises. Chin J Popul Resour Environ 8:92–98 (in Chinese)
Wu JW, Wei YD, Chen W, Yuan F (2019) Environmental regulations and redistribution of polluting industries in transitional China: understanding regional and industrial differences. J Clean Prod 206:142–155
Xing Y, Kolstad CD (2002) Do lax environmental regulations attract foreign investment? Environ Resour Econ 1:1–22
Xu GY (2010) The convergence in carbon dioxide emission: theoretical hypotheses and empirical research in China. J Quant Tech Econ 9:31–42 (in Chinese)
Xu Y (2014) Whether informal environmental regulation from social pressure constraints on China’s industrial pollution? Fin Trade Res 2:7–15 (in Chinese)
Xu J, Zhou M, Li H (2016) ARDL-based research on the nexus among FDI, environmental regulation, and energy consumption in Shanghai (China). Nat Hazards 1:1–14
Zhang J, Fu XL (2007) FDI and environmental regulations in China. J Asia Pac Econ 3:332–353
Zhang YB, Guo YJ (2009) Effect of FDI on environment and environmental protection policy in using FDI in China. Chin J Popul Resour Environ 4:7–12 (in Chinese)
Zhang J, Wu G (2004) The estimation of China’s provincial capital stock: 1952–2000. Econ Res J 10:35–44 (in Chinese)
Zhang C, Lu Y, Lu G, Yu TS (2011) The intensity of environmental regulation and technological progress of production. J Econ Stud 2:113–124 (in Chinese)
Zhang PY, Li HR, Lin FQ (2016) Environmental regulation, environmental efficiency, and FDI: a study from the economic cost perspective. J Int Trade 4:117–128 (in Chinese)
Zhou XR, Li DY (2009) A review of interaction between FDI and sustainable development in host country. World Econ 8:29–37 (in Chinese)
Zhou L, Li J (2015) Foreign direct investment and PM2.5 air pollution: The re-testing of “pollution haven hypothesis” based on China’s data. Int Econ Trade Res 12:98–111 (in Chinese)
Zhou CF, Du YW, Peng AP (2016) Environmental regulations Affect the location selection of FDI: empirical study based on cost perspective. World Econ Stud 1:110–120 (in Chinese)
Zugravu-soilita N (2017) How does foreign direct investment affect pollution? Toward a better understanding of the direct and conditional effects. Environ Resour Econ 2:293–338
Funding
The authors sincerely acknowledge two support funds. One is the Key Laboratory of Carrying Capacity Assessment for Resource and Environment and the Ministry of Land and Resources (CCA2016.05); the other is the Fundamental Research Funds for the Central Universities (No. 53200859697).
Author information
Authors and Affiliations
Corresponding author
Additional information
Responsible editor: Nicholas Apergis
Rights and permissions
About this article
Cite this article
Wang, H., Liu, H. Foreign direct investment, environmental regulation, and environmental pollution: an empirical study based on threshold effects for different Chinese regions. Environ Sci Pollut Res 26, 5394–5409 (2019). https://doi.org/10.1007/s11356-018-3969-8
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11356-018-3969-8