Foreign direct investment and environmental taxes

Roberto De Santis () and Frank Stähler

No 921, Working Paper Series from European Central Bank

Abstract: This paper studies the effect of foreign direct investment (FDI) on environmental policy stringency in a two-country model with trade costs, where FDI could be unilateral and bilateral and both governments address local pollution through environmental taxes. We show that FDI does not give rise to ecological dumping because the host country has an incentive to shift rents away from the source country towards the host country. Environmental policy strategies and welfare effects are studied under the assumption that parameter values support FDI to be profitable. JEL Classification: F12, F18, F23

Keywords: environmental taxes; foreign direct investment; multinational enterprises; plant location (search for similar items in EconPapers)
Date: 2008-07
Note: 185689
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Foreign Direct Investment and Environmental Taxes (2009)
Journal Article: Foreign Direct Investment and Environmental Taxes (2009)
Working Paper: Foreign Direct Investment and Environmental Taxes (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2008921

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