Testing the Validity of the Pollution Haven Hypothesis for Regionally Leading Emerging Economies

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International Congress on Economics, Finance & Energy (EFE)
EFE2020 Book of Proceedings
Testing the Validity of the Pollution Haven Hypothesis for Regionally Leading Emerging Economies

Testing the Validity of the Pollution Haven Hypothesis for Regionally Leading Emerging Economies

Authors : Mehmet Demiral, Özge Demiral

Pages : 69-103

View : 95 | Download : 119

Publication Date : 2020-10-15

Abstract :This study tests the validity of the Pollution Haven Hypothesis (PHH) for the case of six emerging industrial economies with a divergent competitive industrial performance in their regions. The sampled countries are China (East Asia), Poland (Europe), Mexico (Latin America), India (South Asia), South Africa (Africa), and Turkey (Europe and the Middle East). The study adopts a Revealed Comparative Advantage (RCA) approach to the Pollution-Intensive Industrial Products (PIIPs) and differs from many relevant studies by grouping PIIPs and distinguishing a wide range set of factors between those that directly affect the RCA in PIIPs and those that have indirect effects through attracting Foreign Direct Investment (FDI). Estimations of random-effects linear models over the period 1995-2018 provide weak support for the validity of PHH: Despite inward FDI stocks are positively associated with the RCA indices of higher polluting industries, the environmental policy elasticity of inward FDI stocks is slight and insignificant. The study argues that the evidence of the PHH may change over proxies, measurements, model construction, and (more importantly) the classification of PIIPs that should be considered by future studies while analyzing the PHH.
Keywords : Pollution-Intensive Industrial Product, Pollution Haven Hypothesis, Environmental Policy, Foreign Direct Investment, Revealed Comparative Advantage, Emerging Industrial Economies

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