A welfare analysis of pollution control and FDI
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2017
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2560
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eng
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218 leaves
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b199229
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ผลงานนี้เผยแพร่ภายใต้ สัญญาอนุญาตครีเอทีฟคอมมอนส์แบบ แสดงที่มา-ไม่ใช้เพื่อการค้า-ไม่ดัดแปลง 4.0 (CC BY-NC-ND 4.0)
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Kanthasat Boontem (2017). A welfare analysis of pollution control and FDI. Retrieved from: https://repository.nida.ac.th/handle/662723737/6285.
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A welfare analysis of pollution control and FDI
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Abstract
Foreign Direct Investment (FDI) inflows to the host country can drive economic growth especially in developing countries. It is then the strategic planning of such a host country to create a roadmap appealing to these foreign interests. Several policies are then looked at, whereby host countries would implement them in order to attract and leverage these FDI inflows into their economies. On the other hand, when we consider how companies look at their expenditures in terms of overall cost minimization, foreign investors are looking to regions with specific dynamics and countries that can minimize their business while creating economies of scale in the process. Since there are pollution emits from the production process and there are promulgated pollution control regulations in the host country, the cost of pollution abatement is therefore embedded into production costs. Since 1970s there has been a debatable topic among economists about the relation between stringent level of pollution control enforcements and amount of FDI inflows which is related to the pollution heaven hypothesis. The hypothesis states that foreign investors invest in the host countries that having low enforcements of pollution controls and less environmental regulations which perpetually reduce their expenditures and thus create the formula and basis for their decision making. A cycle is then created, with a global conscience saying that these countries are considered by foreign investors as pollution heavens. So, though the countries benefit from constant FDI inflows into their economies, they are also confronted with the inevitability of major environmental impact issues. In this regard, greater economic problems may occur in the long run when the country is forced to look at its overall welfare and wellbeing while weighing their opportunity costs. This dissertation reexamines the relation between pollution control enforcements and FDI inflows, using measurable environmental indicators to quantify the laxity of pollution control enforcements. It examines the impact of pollution control enforcements on FDI inflows, with the null hypothesis that less enforcement will attract more FDI, in industries across the spectrum as well as individual industries. The study was done on a global platform with separate groups of ASEAN countries and domestically within Thailand. Data from the World Bank, UNCTAD and Thailand’s Board of Investment between the years 2008 to 2013 were used with panel data regression. Mixed results were obtained; low levels of pollution control enforcements significantly attracted FDI inflows to ASEAN countries and East Asia Pacific Regions, while in the cases of Europe, Central Asia and the Latin Americas no significant results were found. For Thailand, as a host country, firm-level evaluation procedures using pollution intensity value together with laxity of pollution control enforcements were evaluated. There existed a significant relation between low levels of pollution control enforcements in Thailand and FDI inflows from foreign investors. Evidence of a relation between pollution control enforcements and FDI inflows in Thailand is continuously determined by Computable General Equilibrium (CGE) model in order to investigate the welfare effect to economic agents and also the country as a whole. Thailand’s Social Accounting Matrix (SAM) of the year 2005 was used in CGE to evaluate changes in household’s income as well as for corporate, the government, outputs, exports, imports, aggregate consumption, and the GDP. The welfare investigation by comparison, looks at gains from the increase in household income and GDP versus the loss from the devastating environmental impacts which is not measured or determined in this study. However, evaluation of such welfare loss from the environmental impacts is introduced as a conceptual dimension in the appendix at the end of this study.
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Thesis (Ph.D. (Economics))--National Institute of Development Administration, 2017