Moving to Greener Pastures? Multinationals and the Pollution Haven Hypothesis

This paper presents evidence on whether multinationals are flocking to developing country "pollution havens". We begin with data from four developing countries, examining the pattern of foreign investment in Mexico, Venezuela, Morocco and Cote d'Ivoire. We find almost no evidence that foreign investors are concentrated in "dirty" sectors. We then examine the behavior of multinationals located in these four countries, testing whether there is any tendency for foreign firms to pollute less than their peers. To do this, we use consumption of energy and ‘dirty fuels’, as a proxy for pollution intensity. We find that foreign plants are significantly more energy efficient and use cleaner types of energy. We conclude with an analysis of US outbound investment between 1982 and 1994. We reject the hypothesis that the pattern of US foreign investment is skewed towards industries with high costs of pollution abatement.