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R and D Expenditures and the Pollution Haven Hypothesis: Moderating Effects on MNE Emissions in Developed and Developing Countries
Abstract
The Pollution Haven Hypothesis (PHH) suggests that multinational enterprises (MNEs) relocate dirty production to countries with lax environmental regulation. However, empirical evidence remains ambiguous, highlighting the role of mediating factors. This study econometrically evaluates the link between MNE activity and greenhouse gas emissions across 76 countries and 41 industries (2000–2020). Using OECD data, we analyze the moderating role of technological development, specifically proxied by R and D expenditures. Results indicate that MNEs are generally less carbon-intensive than domestic firms. In developed countries, combining environmental taxation with R and D significantly reduces emissions. The study concludes that R and D mitigates PHH only when paired with market-based instruments (taxes) rather than command-and-control measures (fees). The study concludes that R and D mitigates PHH only within robust institutional contexts.
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