A new look at the pollution halo hypothesis: The role of environmental policy stringency

Hale Akbulut; Ahmet Burçin Yereli

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A new look at the pollution halo hypothesis: The role of environmental policy stringency

Authors

Hale Akbulut Hacettepe University https://orcid.org/0000-0001-5768-6427
Ahmet Burçin Yereli Hacettepe University https://orcid.org/0000-0002-8746-6756

Vol. 50 No. 1 (2023): Junio

Abstract

The effect of Foreign Direct Investments (FDIs) on greenhouse gas (GHG) emissions, has attracted the attention of researchers in recent years. However, the indirect effects of environmental policies in the process were not sufficiently considered. This study uses a panel threshold methodology to examine the nonlinear impact of environmental policy stringency on the relationship between FDIs and GHG emissions in 25 OECD countries. Our results show a negative relationship between FDIs and GHG emissions if the countries have environmental policy stringency index above a threshold level of (2.22). The results are also supported by the fixed effects model, which indicates a threshold effect of (2.88). The threshold effect is mostly due to the stringency of nonmarket-based environmental policies.

Keywords:

Climate change, environmental taxes, public policy

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How to Cite

Akbulut, H., & Burçin Yereli, A. (2023). A new look at the pollution halo hypothesis: The role of environmental policy stringency. Estudios De Economía, 50(1), pp. 31–54. Retrieved from https://revistas.uchile.cl/index.php/EDE/article/view/70870