Environmental Regulation Intensity, Foreign Direct Investment, and Green Technology Spillover—An Empirical Study

Zhao Wang,Xiaoqin Zhang,Jiangfeng Hu,Qinghua Huang

doi:10.3390/su11102718

Abstract

Many researchers have studied the relationships among heterogeneous foreign direct investment (FDI), environmental regulation, and green total factor productivity. However, no research has been done on how different types of FDI can result in green technology spillover under different levels of environmental regulation intensity. To address this research gap, in this paper, we build a static linear panel model, a static panel threshold model, and a dynamic panel threshold model to investigate the environmental regulatory threshold effect of labor-based FDI and capital-based FDI in terms of their green technology spillover. Based on the measurement of green total factor productivity (GTFP) of 36 industry sectors in China from 2003 to 2015, we first compare the threshold effects of environmental regulation on green technology spillover between labor-based FDI and capital-based FDI with a static linear model and a static threshold model. The results show that environmental regulation is unable to significantly promote the green technology spillover of labor-based FDI. However, intensifying environmental regulation can reduce the negative impact of labor-based FDI on GTFP. The effect of environmental regulation on green technology spillover of capital-based FDI is more complex. In the static linear model, environmental regulation can significantly promote the green technology spillover of capital-based FDI. In the static threshold model, the green technology spillover of capital-based FDI exists only when the environmental regulation intensity is sufficiently low or sufficiently high. Finally, the dynamic threshold model is adopted for robustness check. The results show when the environmental regulation intensity is higher than a threshold, both types of FDI can indeed result in green technology spillover. In short, our results prove that to ensure that FDI results in green technology spillover, it is necessary to continue to strengthen environmental regulation.

Highlights

foreign direct investment (FDI) has become an important thrust for the economic development of many developing countries [1,2]
There is no research on how heterogeneous types of FDI can generate technology spillover under different levels of environmental regulation intensity
Combining static linear panel model, static panel threshold model and dynamic panel threshold model, we investigate the environmental regulatory threshold effect of labor-based FDI and capital-based FDI in terms of their green technology spillover

Summary

Introduction

FDI has become an important thrust for the economic development of many developing countries [1,2]. Considering the relatively relaxed environmental regulations in many developing countries, developing countries can become the ‘pollution haven’ of multinational corporations. According to the theory of resource endowment, because of the comparative advantage of rich human capital and relatively loose environmental control in developing countries, multinational corporations will transfer pollution intensive production to developing countries [3,4,5]. This transfer can boost the productivity of a host country, it causes serious environmental pollution [1,6,7,8]

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Conclusion