Environmental Spillovers from Foreign Direct Investment: Firm-level evidence from Vietnamese manufacturing

Author Name JINJI Naoto  (Faculty Fellow, RIETI) /TSURUMI Tetsuya  (Nanzan University)
Creation Date/NO. October 2015 15-J-057
Research Project A Study on Trade/FDI and the Environment/Energy
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In this study, we investigate how inward foreign direct investment (FDI) influences the environmental actions of local firms in the host country. We use firm-level data of Vietnam manufacturing firms for the period 2007-2008. Environmental actions are measured in five indexes, including adoption of environmental management system, certification of environmental standards, and application of cleaner production. We estimate the direct effect of foreign ownership share and three types of spillover effects on the environmental behavior of firms. Spillover effects include horizontal, forward, and backward spillovers. We find positive and statistically significant direct effects and negative and significant horizontal spillovers. We also find positive and significant backward spillovers when firms engage in international trade. Moreover, we find heterogeneity in both direct and spillover effects among source countries of FDI.