Abstract
We analyze strategic environmental standards in the presence of foreign direct investment. A number of foreign firms located in a host country compete with a domestic firm in another country to export a homogeneous good to a third country. When the number of foreign firms is exogenous, the host country applies a stricter environmental regulation than the other producing country. However, under free entry and exit of foreign firms, the host country may apply a less severe standard under both non-cooperative and cooperative equilibrium. We also find that the nature market structure does not affect the equilibrium values of total pollution if export subsidies are also used.
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Kayalica, M.Ö., Lahiri, S. Strategic Environmental Policies in the Presence of Foreign Direct Investment. Environ Resource Econ 30, 1–21 (2005). https://doi.org/10.1007/s10640-004-0757-3
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DOI: https://doi.org/10.1007/s10640-004-0757-3