An Examination Of Us FDI Into Mexico And Its Relation To Nafta: Understanding the Effects of Environmental Regulation and the Factor Endowments that Affect the Location Decision

Abstract

This article examines the impact of the NAFTA signing on US foreign direct investment into Mexico with respect to environmental expenditures and factors including capital, technology, and both skilled and unskilled labor. Our results demonstrate, somewhat counterintuitively, a trend of US foreign direct investment into Mexico in industries characterized as lower polluting.Further, our analysis is unable to detect firm movement to Mexico for either specifically high or low technology workers.

The Impact of Environmental Regulation on Firm and Country Competitiveness: A Meta-analysis of the Porter Hypothesis

“…Table 9 also reports on a statistical test of the hypothesis that preferred effect sizes are equally likely to be positive as negative. 17 We can reject this hypothesis in only two such comparisons. First, when data is U.S. based, effect sizes are more likely to be negative (36% negative versus 64% positive, p < .05).…”

The Impact of FDI on CO2Emissions in Latin America

“…Some studies, such as Cole and Ensign (2005), MacDermott (2006), Barbier and Hultberg (2007), and Waldkirch and Gopinath (2008) Biglaiser and Staats (2008) is one of the most recent studies that do not find support for the pollution haven hypothesis for Latin America, they use a survey of American executives of corporations with presence in Latin America and find that investment risk is the main factor driving FDI in the region. Additionally, Grossman and Krueger (1991), Carrada-Bravo (1995), and Cole and Ensign (2005) do not find empirical evidence that Mexico became a pollution haven with NAFTA. Furthermore, Birdsall, et al, (2001) find support for the "pollution halo" hypothesis in the case of Chile.…”

Linkages between Environmental Policy and Competitiveness

“…List et al (2003) found that pollution-intensive plants were responding to environmental regulations, and Becker and Henderson (2000) found that nonattainment status of air quality regulations, which triggers specific equipment requirements, reduced plant births for polluting industries. Counterintuitively, however, the findings of Cole and Ensign (2005) demonstrated a trend of US FDI into Mexico in industries characterized as lower polluting. And, Javorcik and Wei (2004) found no support for the pollution haven hypothesis that stringent environmental standards induce relocation of firms.…”