The Politics of Selective Environmental Enforcement

• In Event: Multinational Firms and the Politics of Arbitration

Abstract

Do firms with foreign ownership receive preferential treatments when developing country governments enforce environmental laws and regulations? In this article, I argue that regulators in developing countries may relax enforcement for foreign firms given the positive spillover benefits they deliver. Also, since foreignness tends to intensify public grievance about environmental degradation, regulators may present positive images of foreign firms in front of the public to minimize possible negative sentiments. To test these arguments, I construct an original dataset consisting of enforcement decisions on key-monitored polluting firms in the Jiangsu province, China, from 2012 to 2014. I find that firms with foreign ownership 1) are less likely to be punished than domestic private firms, 2) are more likely to obtain preferential exemptions, and as a result, pay fewer pollution levies and 3) are more likely to receive higher scores in the environmental credit rating system. These advantages are substantively significant.

Author

• Qing Deng, Pennsylvania State University