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FDI and the Capital Intensity of “Dirty” Sectors: A Missing Piece of the Pollution Haven Puzzle
Author(s) -
Cole Matthew A.,
Elliott Robert J. R.
Publication year - 2005
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/j.1467-9361.2005.00292.x
Subject(s) - haven , pollution haven hypothesis , economics , foreign direct investment , developing country , pollution , capital (architecture) , capital intensity , empirical evidence , development economics , international economics , economic growth , macroeconomics , human capital , geography , ecology , philosophy , mathematics , archaeology , epistemology , combinatorics , biology
In an increasingly integrated world, falling trade barriers mean that the role environmental regulations play in shaping a country's comparative advantage is greater than ever. This has lead to fears that “dirty” industries will relocate to developing regions where environmental regulations may be less stringent. A number of reasons have been offered to explain why, despite anecdotal evidence and the predictions of theoretical studies, little empirical verification for the existence of pollution havens has been found. Little attention, however, has been paid to the capital intensity of pollution intensive sectors. We investigate the relationship between US outward FDI and factor endowments across sectors to two developing countries. We highlight the role of capital and believe it partially explains why pollution havens are not more widespread. Our approach also highlights those countries that are likeliest to become pollution havens. A multivariate analysis reveals some evidence of pollution haven consistent behavior.