Does Foreign Direct Investment Harm The Host Country's Environment?: Evidence From China
- Topics:
- Foreign Direct Investment
- Tags:
- Currency & Foreign Exchange,
- Developing Country,
- Finance,
- Foreign Direct Investment,
- Foreign Direct Investment (FDI),
- Free Trade,
- Investment
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Overview: As more manufacturing is moved to the developing countries, policy makers become concerned with the environmental consequence. Relatively lenient environmental policies in the developing countries may give them a comparative advantage in pollution intensive goods, and openness to trade and foreign direct investment might harm the host country's environment. This paper examines the relationship between the scale of foreign direct investment and local air pollution in China and suggests that the opposite might be true. Trade and foreign direct investment could have beneficial effect on a developing country's environment when the multinationals crowd out inefficient local firms, when they change the industry composition, and when they bring more efficient technology into the host country and improve productivity and energy efficiency.
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Format: PDF | Size: 448KB | Date: Apr 2006 | Pages: 25
