Empirical studies on the trade-environment nexus that use panel data face two simultaneous challenges. One is associated with the potential presence of unobserved cross-country heterogeneity, while the other is due to the use of aggregate data. In this paper, we apply both the dynamic fixed effects and iterative empirical Bayes estimators to show first that when country heterogeneity is accurately accounted for in the estimation, it is possible to obtain significant impacts of trade variables on the environment, even though we use aggregate data. Second, using both the empirical Bayes parameter estimates and indicators of stringency of environmental regulations, we show that at low levels of stringency, the probability of having pollution-intensive foreign direct investments (FDIs) increases with a decrease in stringency. However, at high levels of regulatory stringency, more stringent regulations may lead to more pollution-intensive FDIs. This implies that pollution havens may exist only if environmental regulations are very lax or nonexistent.
Research FellowFatih is a research fellow at KAPSARC.He received his Ph.D. in economics from the Pantheon-Sorbonne University in Paris and his…Fatih is a research fellow at KAPSARC.He received his Ph.D. in economics from the Pantheon-Sorbonne University in Paris and his M.A. in economic analysis and modeling jointly from the Pantheon-Sorbonne University and the École Centrale Paris. Before joining KAPSARC in December 2017, Fatih was a research fellow at EconomiX-CNRS and an associate professor of economics at the University of Paris, Nanterre, where he taught econometrics, energy economics, and environmental economics.
Fatih's current research focuses mainly on developing economic frameworks to provide insights into energy policymaking in oil-producing countries. His research has been published in general-interest economics journals (e.g., Applied Economics, Journal of Comparative Economics and Macroeconomic Dynamics), as well as journals on energy economics (e.g., Energy Economics, Energy PolicyandThe Energy Journal).