| It is meaningful to find out if the "pollution haven" and the ―race to the bottom‖ hypotheses still apply, as the environment is attracting more and more global attention, and the competition strategies between local governments are extending from the relaxation of environment regulation to the improvement of the environmental quality. In order to reflect the relationship between FDI, local government competition and environmental pollution more scientifically and objectively, this paper builds two governments game model, analyzing the characteristics of the local governments’ environmental policies in the inviting outside investment competition, and builds a simultaneous equations model for empirical research, based on a sample of 31 Chinese provincial regions during 2004-2012, as well as spatial econometrics. The research results show that(1) the FDI competition promotes local government to adopt lower environmental regulations than its rivals to cater to enterprises, and to improve the environment to meet the requirements of enterprises, families and environment, both in order to realize the self-interest maximization.(2) the two types of local government’s environmental policy have obvious influence on the FDI location choice in general: the improvement of environmental regulation will hinder the FDI inflows, of which the central region has the strongest influence, while eastern region is on the contrary; the improvement of environment optimization efforts will help China and its eastern region to attract more FDI, but there is no significant impact on the central and western region.(3) there are strategic competition behaviors between local governments, when in terms of environmental regulation, a local government tends to take a lower standard than the surrounding areas, a little similar to what the "race to the bottom" hypothesis suggested, and the western region has the most fierce competitive, followed by the central and eastern region; while in respect of environmental optimization, the local government inclines to take higher degree of effort than adjacent areas as "race to the top" competition, and the eastern region has the most intense competition, followed by the central region, while this doesn’t have significant effect on the western region.(4) the FDI inflows overall fuel the environmental pollution, in line with the "pollution haven" hypothesis, and the western region’s FDI inflows have the worst impact on the environment, followed by the central region, while the eastern region is otherwise. It is worth noting that the differences between the eastern, central and western regions, clearly reflect the international competitiveness of environment in different stages of development, which is of great significance to the practice of introduction of FDI and the environmental protection. |
