Does Lax Environmental Regulation Attract FDI When Accounting for 'Third-Country' Effects?

Abstract

This paper investigates if di¤erences in environmental regulations can in ‡u-ence FDI ‡ows in a multi-country setting taking into account the so-called "thirdcountry" e¤ect. We examine bilateral FDI ‡ows using a new extended OECD investment database which covers great number of host countries and a long sample period . The …ndings based on a spatial gravity-like model are largely plausible across speci…cations and con…rm the existence of a negative relationship between FDI and environmental stringency, once we correct for endogeneity and spatial dependence. The evidence of a positive "third-country" e¤ect for FDI suggests the prevalence of complex FDI from developed to developing countries. The spatial structure of the model allows also to underline the possible existence of competition in environmental standards between countries to attract FDI.

Migration and Regional Unemployment in Italy

“…In other words, the coefficients associated to each explanatory variable lose their typical interpretation since a change in a single observation (region) associated with any given explanatory variable will affect the region itself (a direct impact) and potentially affect all other regions indirectly (an indirect or spatial spillover effect) through the spatial multiplier mechanism. The direct impact includes the effect 10 From the Wald test, we see that we can reject the null 0 = ( 1 + 2 + 3 ) , as well as the null…”

“…10 This implies that the characteristics of province i (for example, its level of net-migration) or an idiosyncratic shock in that province do not only influence the unemployment dynamics in that location, but they also affect the outcome of all other regions with an intensity that decreases with distance [26]. In other words, the coefficients associated to each explanatory variable lose their typical interpretation since a change in a single observation (region) associated with any given explanatory variable will affect the region itself (a direct impact) and potentially affect all other regions indirectly (an indirect or spatial spillover effect) through the spatial multiplier mechanism.…”

“…In an effort to better analyze the effects of migration on regional unemployment dynamics, we propose a methodological framework based on dynamic spatial panel data models with endogenous variables [9][10][11]. Estimation results point out the lack of the equilibrating effect of labor migration on interregional unemployment disparities predicted by the neoclassical approach.…”

“…Since these estimators are based on the assumption of only exogenous covariates except for the time and spatial lag terms, various empirical studies dealing with endogeneity issues in a dynamic spatial panel framework have applied the System-GMM (Generalized Method of Moments) estimator. More specifically, Kukenova & Monteiro [10] have investigated the finite sample properties of different estimators for spatial dynamic panel models (namely, spatial ML, spatial dynamic ML, spatial dynamic quasi-ML, least-square-dummy-variable, Diff-GMM and System-GMM) and concluded that, in order to account for the endogeneity of several covariates, spatial dynamic panel models should be estimated using System-GMM. The main argument of applying System-GMM in a spatial context is that it corrects for the endogeneity of the spatial lagged dependent variable and other potentially endogenous explanatory variables.…”

Is the WTO Truly Effective?

“…The coefficient of OECD countries is positive (not significant). As noted in [30] and [31], one reason is that trade costs have declined sharply since the 1980s. Alternatively, improvements in IT may have contributed greatly.…”