One of the most contentious debates today is whether pollution-intensive industries seek
locations with weak environmental standards, turning these locations into “pollution havens.”
Empirical studies to date show little evidence to support the pollution haven hypothesis, but
suffer potentially from omitted variable bias, specification, and measurement errors. This paper
estimates the strength of pollution-haven behavior by examining the location choices of equity
joint venture (EJV) projects in China. We derive a location choice model from a theoretical
framework that incorporates the firm’s production and abatement decision, agglomeration and
factor abundance. We estimate conditional logit and nested multinomial logit models using new
data sets containing information on a sample of EJV projects, effective environmental levies on
water pollution, and estimates of Chinese emissions and abatement costs for 3-digit ISIC
industries. Results from 2886 manufacturing joint venture projects during 1993-1996 show
EJVs from all source countries go into provinces with high concentrations of foreign investment,
relatively abundant stocks of skilled workers, concentrations of foreign firms, and special
incentives. Environmental stringency does affect location choice, but not in the manner described
by the pollution haven hypothesis. Relatively weak environmental levies are a significant
attraction for joint ventures with partners from Hong Kong, Macao, Taiwan, and other Southeast
Asian developing countries. In contrast, joint ventures with partners from industrial country
sources (e.g., US, UK and Japan) are actually attracted by stringent environmental levies,
regardless of the pollution intensity of the industry. We discuss the likely role of technological
differences in explaining these results.