DoesFDIHarmHostCountryEnvironment-Universityof.pptVIP

Does FDI Harm the Host Country’s Environment?Evidence from Coastal and Interior China Helen Feng Liang University of California, Berkeley April 12, 2006 Why study trade and pollution? Environmental issues are global global warming, ozone depletion, acid rain, etc. Trade could have impact on environment WTO, NAFTA Are dirty industries moving to the South? Trade could lead to growth, growth could be good or bad for the environment Trade policy and environmental policy What makes China an interesting unit of analysis? Received a large amount of FDI in recent years A popular destination of manufacturing outsourcing Vast number of cities, large variety in location, economic development, access to foreign investment, and policy Increasing pollution problems Research Question? What’s the impact of foreign direct investment on the environmental quality in China? What are the channels of the impact? Outline Introduction Theory Foreign Direct Investment and Environment in China Data, Measurement, and Empirical Strategy Result and Conclusion Discussion How Does Trade Influence Pollution? Openness ? Growth ? Less or More Pollution Trade ? More output ? More pollution: Scale Effect Trade ? Higher income ? Higher demand for environ: Income Effect Environmental Kutznet Curve: an inverse-U shaped relation between per capita GDP and Pollution level Grossman Krueger 1993, 1995, Frankel Romer 1999 Openness ? Tech Efficiency ? Less pollution: Technique Effect Antweiler et al 2001, Frankel Rose 2002 Wang Jin 2002 Limitation of Cross Country studies: Endogeneity of Trade Policy and Environmental Policy Contribution of my study: within-country study to overcome endogenous trade policy Foreign Direct Investment in China: What’s driving the distribution of FDI? Government policy 4 special economics zones and 14 coastal open cities Geographic location Closeness to sea ports/trade hubs: Shanghai, Hong Kong, etc FDI’s Effect on the Environment: FDI ? more pollut