Re-examination of 'Pollution Haven' or 'Pollution Halo' Effect on Foreign Direct Investment: Evidence from 'Two Control Zones' Policy in China

摘要

Based on panel data of prefecture-level cities from 1996 to 2017, taking account of the exogenous shock of the "Two Control Zones" (TCZ) policy, this paper investigates empirically the impact of environmental policy on Foreign Direct Investment (FDI) by using the methods of difference-in-differences (DID) and Propensity score matching method (PSM-DID). The results show that the implementation of the environmental policy does inhibit FDI and verifies the existence of "pollution haven" effect in China for a long time. While strengthening the opening up and actively introducing foreign capital, Chinese governments must keep the bottom line of environmental regulations to ensure the quality of FDI.