Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153355
Authors: 
De Santis, Roberto A.
Stähler, Frank
Year of Publication: 
2008
Series/Report no.: 
ECB Working Paper 921
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.
Subjects: 
environmental taxes
Foreign Direct Investment
multinational enterprises
plant location
JEL: 
F12
F18
F23
Document Type: 
Working Paper

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