The "Pollution Haven Hypothesis" Test Of FDI

With the rapid development of economic globalization,foreign direct investment(FDI)has been increasing in China.In the early stage of reform and opening up,China has encouraged the entry of foreign investment in order to solve the serious shortage of funds and the low level of industrialization.But when the economy develops to the present stage,under the fact that the environmental pollution is more and more serious,people have to start to reexamine whether the introduction of foreign investment can really promote the sustainable development of China.Because the "Pollution Haven Hypothesis" is a more intuitive description of the relationship between foreign direct investment and environmental pollution,so this paper takes the2005-2014 provincial panel data as the basis,establish the econometric model to test the "Pollution Haven Hypothesis",and whether the environmental regulation intensity has an effect on FDI.At the same time,the regional wage level,population density,the level of regional economic development,the degree of marketization variables were introduced into the measurement model,in order to fully reflect the characteristics of various regions in China.The results show that the shape about the impact of environmental regulation on FDI likes an inverted "U".The environmental regulation has a double effect on China's FDI inflow.On the left side of the inverted "U" shape,FDI increases as environmental regulation level decrease,and on the right side of the inverted "U" shape,FDI decreases as environmental regulation level decrease.So now the "Pollution Haven Hypothesis" is tenable in our country.At the same time,FDI tends to flow into the provinces with low wage level,large population density,relatively developed economy and high degree of marketization.While testing the hypothesis of pollution haven,this paper also studies the coordination between FDI and economic development in China.In the background of China's economic development and the status quo of FDI,a "economic development & FDI" complex system model has been established to analyze the relationship between economic development and FDI.The results show that the degree of coordination between the two systems is very weak.So,the idea of attracting FDI at the expense of the environment in order to promote regional economic growth is not a wise move.