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An Empirical Test on the Pollution Havens Hypothesis of the Foreign Direct Investment——Evidence from Jiangsu

CUI Dao-ling (School of Economics,Nanjing Audit University,Nanjing 210029,China)  
This paper tests the Pollution Havens Hypothesis by using the data from Jiangsu Province which has attracted most of foreign direct investment (FDI) in China.We find that a) the optimal lagged period of the Granger causality between environmental pollution and the FDI is less than 2 years;b) the deterioration of environmental conditions and the slack environmental regulation in Jiangsu Province is the major cause of attracting the FDI,though the local environmental pollution is not solely caused by the FDI.Therefore,the Pollution Havens Hypothesis holds;and c) with the implementation of the "Polluter Pays Principle"(PPP),the Pollution Havens Hypothesis and the relationship between the lax environmental regulation and the FDI need to be further identified and tested.
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