Soft and Hard Aspects of Green Behaviour: A firm-level study of the pollution haven hypothesis in the Mediterranean Basin

The paper tests the pollution haven hypothesis in the context of three EU border economies in the Mediterranean Basin: Greece, Italy and Turkey. Large differences in soft and hard aspects of green behaviour are revealed. Multinational firms are more likely to use ‘soft talk’ strategies across the three economies, but at the same time they are often more energy intensive than their domestic counterparts. Data for electricity consumption (where the largest regulatory differences exist across the EU border) demonstrate that there is a difference in the energy intensity of foreign and domestic firms in Turkey (at prices 45% lower than the unweighted EU average). Controlling for other factors such as location, industry, export intensity, size and age of firms the study finds that foreign firms on average consume 114% more electricity than other firms in Turkey. The same difference was not present in the data for Italy and Greece.