Environmental Regulations and Industry Location:
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International and Domestic Evidence
This paper surveys the empirical literature on the sensitivity of investment
to environmental regulations, both internationally and domestically within the
U.S. Although more than twenty years of empirical research has been unable to
show convincingly that stringent environmental standards deter investment or
that weak regulations attract investment, many interest groups continue to argue
that there is a strong relationship. This paper reviews some anecdotal evidence
that local and national legislators take these effects seriously, along with the
empirical evidence that fails to find them, and concludes by suggesting several
potential explanations for this apparent logical inconsistency.
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