Environmental regulation induced foreign direct investment

The last decade has witnessed a renewed interest in the relationship between environmental regulations and international capital flows. However, empirical studies have so far failed to find conclusive evidence for this so-called pollution haven or race to the bottom effect where foreign direct investment (FDI) is assumed to be attracted to low regulation countries, regions or states. In this paper we present a simple theoretical framework to demonstrate that greater stringency in environmental standards can lead to a strategic increase in capital inflows which we refer to as environmental regulation induced FDI. Our result reveals a possible explanation for the mixed results in the empirical literature and provides an illustration of the conditions under which environmental regulations in the host country can affect the location decision of foreign firms

The optimal treatment of an infectious disease with two strains

This paper explores the optimal treatment of an infectious disease in a Susceptible-Infected-Susceptible model, where there are two strains of the disease and one strain is more infectious than the other. The strains are perfectly distinguishable, instantly diagnosed and equally costly in terms of social welfare. Treatment is equally costly and effective for both strains. Eradication is not possible, and there is no superinfection. In this model, we characterise two types of fixed points: coexistence equilibria, where both strains prevail, and boundary equilibria, where one strain is asymptotically eradicated and the other prevails at a positive level. We derive regimes of feasibility that determine which equilibria are feasible for which parameter combinations. Numerically, we show that optimal policy exhibits switch points over time, and that the paths to coexistence equilibria exhibit spirals, suggesting that coexistence equilibria are never the end points of optimal paths