A study on the threshold effect of different types of environmental regulations on FDI

Abstract

The environmental regulations are divided into three types including command-control (CER), market-incentive (MER) and public-participation (PER) in this paper. Based on the panel data in 30 provinces, cities and autonomous regions in China from 2003 to 2014, the threshold plate regression model was used to empirically test the threshold effect of different types of environmental regulations on FDI. The results are as follows: There are threshold effects on the impact of environmental regulations on FDI, an inverted U-type relationship between CER and PER and FDI, and a U-type relationship between MER and FDI. However, there is spatial heterogeneity in the impact of environmental regulations on FDI, wherein the results of the threshold effect in eastern regions are similar to those of the whole country. The impact of different types of environmental regulations on FDI in the central and western regions is not obvious with no threshold effect.