Strategic environmental policies in the presence of foreign direct investment

Kayalica M. Ö. , Lahiri S.

ENVIRONMENTAL & RESOURCE ECONOMICS, cilt.30, sa.1, ss.1-21, 2005 (SSCI İndekslerine Giren Dergi) identifier identifier

  • Cilt numarası: 30 Konu: 1
  • Basım Tarihi: 2005
  • Doi Numarası: 10.1007/s10640-004-0757-3
  • Sayfa Sayıları: ss.1-21


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.