look at many different factors: the costs of labor and financial capital; whether the location is close to a reliable

suppliers of the inputs that they need; whether the location is close to customers; the quality of transportation,

communications, and electrical power networks; the level of taxes; and the competence and honesty of the

local government. The cost of environmental regulations is a factor, too, but typically environmental costs are

no more than 1 to 2% of the costs that a large industrial plant faces. The other factors that determine location

are much more important to these companies than trying to skimp on environmental protection costs.

When an international company does choose to build a plant in a low-income country with lax environmental

laws, it typically builds a plant similar to those that it operates in high-income countries with stricter

environmental standards. Part of the reason for this decision is that designing an industrial plant is a complex
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