Abstract
This study aims to analyze the pollution haven phenomenon concerning Foreign Direct Investment (FDI) inflows, focusing on environmental regulations (stringency), corruption, environmental taxes, and the interaction between stringency and corruption. Additionally, it will investigate the impact of the pollution haven on GDP per capita, labor, and trade openness to FDI inflows. Using the System Generalized Method of Moments (GMM) estimations, this study examines data from six investor countries in the Indonesian palm oil sector between 2009 and 2019.The main findings indicate that both stringency and corruption have a significant positive effect on FDI inflows, while the interaction between stringency and corruption has a significant negative effect on FDI inflows in the Indonesian palm oil sector. This suggests that lax environmental regulations combined with an honest bureaucracy prevent investors from receiving legal protection, indicating a significant relationship between the interaction variable of stringency and corruption and FDI inflows, thus invalidating the pollution haven hypothesis.
To improve government policy regarding stringency, the implementation of environmental taxes is recommended. Policies addressing corruption should aim to simplify bureaucratic procedures for investors. The combination of these regulations is expected to help the Indonesian government attract FDI inflows without turning Indonesia into a pollution haven.
| Date of Award | 2023 |
|---|---|
| Original language | Indonesian |
| Supervisor | Unggul Heriqbaldi (Supervisor) |
Keywords
- FDI inflows
- Environmental regulations
- Pollution Heaven Hypothesis
- corruption
- environmental tax