Environmental Regulations and Industry Location:
International and Domestic Evidence

Abstract

This paper surveys the empirical literature on the sensitivity of investment to environmental regulations, both internationally and domestically within the U.S. Although more than twenty years of empirical research has been unable to show convincingly that stringent environmental standards deter investment or that weak regulations attract investment, many interest groups continue to argue that there is a strong relationship. This paper reviews some anecdotal evidence that local and national legislators take these effects seriously, along with the empirical evidence that fails to find them, and concludes by suggesting several potential explanations for this apparent logical inconsistency.

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