What better place is there to observe a putative "pollution haven hypothesis" than China, the world's largest carbon emitter and workshop to the world? Zeng and Eastin use regression models to determine the relationship between FDI / trade openness in various Chinese provinces and sulfur dioxide emission (Model 1), industrial soot emission (Model 2), and solid waste emission (Model 3). Their findings:
In all of the model specifications, our key independent variables (e.g., fdi, openness, impgdp, and expgdp) have consistently demonstrated a negative and statistically significant relationship with our alternative measures of environmental pollution and the relationships are highly significant as well.So much for the "pollution haven hypothesis" in China according to these researchers. Yes, there is a lot of pollution in China, but it's likely to be homegrown instead of imported from elsewhere. It seems those danged foreign investors do care about their contributions to local pollution. Let's see the anti-globalization types deal with this one:
Our empirical analysis of the effects of provincial trade openness and FDI on industrial pollution levels has yielded the somewhat surprising conclusion that increased trade openness and FDI is positively associated with environmental protection in China. It challenges the conventional view of the ‘‘impact of free trade’’ on the environment, suggesting that far from creating a ‘‘race to the bottom,’’ trade openness encourages environmental protection via firm self-regulation, and an improvement in firm-level environmental regulatory and production standards in order to ensure global export market accessibility. Additionally, FDI has the potential to introduce newer and more environmentally sustainable technologies and management practices via MNC-subsidiary linkages, and provides encouragement for local technological development through heightened competition. When taken in concert, the dynamics of economic integration through FDI and trade openness combined with a ratcheting up of developed-world environmental regulatory policies, suggests that as the world shifts toward a more globalized market, environmental standards will rise.
