We suggest a novel perspective on the relationship between the stringency of environmental policies and foreign direct investment (FDI). We develop a political economy model with imperfect product market competition where local and foreign firms jointly lobby the local government for a favorable...

In an increasingly integrated world, falling trade barriers mean that the role environmental regulations play in shaping a country's comparative advantage is greater than ever. This has lead to fears that 'dirty' industries will relocate to developing regions where environmental regulations may...