A Study On Relationship Between FDI And Environmental Regulation In Host Developing Countries

Environment is the foundation and restricting factors for human survival and development. Environmental bearing capacity is limited. One of the main reasons leading environmental pollution is economic activities in economies, especially enterprise production activities. Environment is a kind of public goods, environmental pollution has externalities that result in environmental problem, therefore environmental regulation is necessary. Environmental regulation will influence firms production decisionsSince 90s of the 20th century, developing countries with enhanced economic liberalization trend have taken foreign policy attracting FDI. The multinational company of the developed countries have played great role in promoting the developing host countries'economic growth. So since FDI entered the developing countries at that moment, Closely, they are doomed to relate to the pollution problem in developing host countries that raises the research on the relationship between FDI and developing host countries'environment. The research on relationship between FDI and developing host countries environmental regulation is an important aspects in that research field.This paper mainly discusses the following two questions:First of all, Whether all developing countries with loose environmental regulation would be "pollution haven" for multinational company in developed countries with stringent environmental regulation? Second, Whether inward FDI to developing economies will influence the change in environmental regulation strength in developing economies?In order to study the first question, this paper uses theory of international production in new classical international trade theory analyses the macro theoretical basis for how dose environmental regulation in developing host countries influence the scale of inward FDI? Although the new classical international trade theory, radical economics and ecological economics policy proposals are different, they provide theory basis for "pollution haven" hypothesis.The second question studied in this paper is FDI's effects on developing host countries'environmental regulation. Based on the definition of environmental regulation in this paper, using Damania's environmental regulation determine model to analyse the feature of environmental regulation in developing economies. Due to the low economic development level, relatively, environmental protection pressure groups have small influence in developing countries, therefore environmental protection pressure groups are not able to put pressure on making environmental regulation. In contrast, Polluting enterprise actually influence the change in the environmental regulation strongly,So the firms prefer command-control environmental regulation. Weak political system in developing countries, such as inefficient public management institution limits the capability of providing environmental regulation. Therefor command-control environmental regulation is the main environmental regulation in developing countries. It is easy for environmental regulation institution being captured by environmental pressure groups under this kind of environmental regulation.This paper point out that the effects of inward FDI on environmental regulation in developing countries is uncertain.When political market is in equilibrium in developing host countries if the government captured degree is low inward FDI will be good for improving environmental regulation strength, conversely, FDI will reducing environmental regulation strength.The conclusion for the two questions studied in this paper is that the developing countries with more loose environmental regulation and more Physical capital are most possible to be "pollution of haven". But if these developing countries low the government captured degree, the environmental regulation strength will be improved as the increasing of inward FDI. Since inward FDI have played great role in promoting the developing host countries' economic growth developing countries should attract FDI and Use them to realize the economic, social and environmental sustainability.According to this study thinking and logical framework, this paper includes six chapters. Detailed themes and contents are listed below:Introduction. It introduces the research background, structure arranged, innovations of this paper and so on.Chapter 2 discusses theoretical basis and provides the literature review on the research. First of all, this paper discusses the theoretical basis of that environmental regulation in developing countries influence the scale of inward FDI from angle of new classical trade economics; this paper discusses the theoretical basis of that inward FDI influence the change in environmental regulation in developing countries from angle of theory global reach and internalization.Second, this chapter finds the way of studying questions by reviewing literature.Chapter 3 discusses the features of the environmental regulation in developing countries. First, this chapter discusses theoretical basis of the environmental regulation. Second, this chapter discusses the definition of the environmental regulation providing basis of analyzing the features of the environmental regulation in developing economies and the effects of inward FDI on the change in the environmental regulation in developing economies. Third,this chapter analyzes the effects of environmental regulation on enterprise production costs. Finally, this chapter discusses the features of the environmental regulation in developing countries.Chapter 4 discusses the environmental regulation in developing countries influence the scale of inward FDI with an empirical study.Chapter 5 discusses FDI's effects on developing host countries' environmental regulation with an empirical study.Chapter 6 gets some conclusions and suggestions.