An empirical investigation of the Pollution Haven Hypothesis in Iran

Document Type : Original Article


1 Assistant Professor, Department of Economics, Payam Noor University (PNU), Tehran, Iran

2 Assistant Professor, Department of Economics, Payame Noor University, Tehran, Iran.

3 Master student , Department of governmental management adaptation and development, Payam Noor University, Tehran, Iran.


The Pollution Haven Hypothesis is one of the most influential theories that reviews the effects of environmental laws and policies. In keeping with the implementation of milder environmental laws or the lack of strictness in implementing relevant laws, polluting industries have been transferred to some developing countries. This process turned the above countries into a haven for polluting industries worldwide. The pollution haven hypothesis argues that polluting industries will relocate to regions with looser environmental regulations known as "Pollution Havens," generally low-income countries, when countries open up to international trade. In the present research, the experimental investigation of the pollution shelter hypothesis was carried out in Iran using an econometric model of Auto Regressive Distributed Lag (ARDEL). The results indicate that an increase in CO2 emissions per capita increases Foreign Direct Investment (FDI) flows in Iran. The relationship between economic openness and the foreign direct investment flow was confirmed by the positive and significant coefficient of the Trade Freedom index in Iran. Finally, it was found that there is a positive relationship between the population growth rate and foreign investment flow in Iran.