Foreign direct investment and discriminatory environmental enforcement: a firm level perspective

Abstract

ABSTRACT This study focuses on de facto environmental enforcement and tests whether the practice of environmental enforcement discriminates against foreign-invested firms in a developing country. Using original firm-level enforcement data in the Jiangsu province of China, 2012–2014, this article examines the effect of foreign ownership on the enforcement of three regulatory instruments: economic incentives, command-and-control, and naming-and-shaming. After controlling for firms’ environmental performance, I find that firms with foreign ownership 1) pay fewer pollution fees, 2) are less likely to be punished, and 3) are more likely to obtain the highest score in the environmental credit rating system than domestic firms.