Multiple environmental policies and pollution haven hypothesis: Evidence from China's polluting industries

Theoretical studies of pollution haven hypothesis predict that differentiated environmental regulation policies will result in inter-country relocation of polluting industries. This paper investigates pollution haven hypothesis at domestic level in China. Using panel data of 30 provincial level regions for the period 2004 to 2013, this paper empirically examines to what extent multiple environmental policies affect intra-country relocation of polluting industries in China. It is found that the implementation of both economic policy instrument like pollution discharge fee and public participation like letter complaints on environmental problems encourages industrial relocation, whereas the implementation of environmental legal policy instrument like laws, regulations and rules prevents polluting industries from relocating to other regions. It is also found that the relocation effect of environmental policies varies with industrial characteristics. Compared with water pollution-intensive industry, air pollution-intensive industry dominated by stated-owned capitals are insensitive to legal policy instruments. These findings suggest that the validity of pollution haven hypothesis is jointly associated with the type of environmental policy as well as industrial characteristics.