The Difference in the FDI - CO2 Emissions Relationship between Developed and Developing Countries: Empirical Evidence Based on Institutional Perspective

Van Bon Nguyen

Hitotsubashi Journal of Economics, 2021, vol. 62, issue 2, 124-140

Abstract: The role of FDI relating to the problems of environmental pollution in host countries has been recognized by related literature. Some papers posit the pollution haven hypothesis while others advocate the pollution halo hypothesis. The paper provides empirical evidence to demonstrate that the relationship between FDI and environment quality varies based on the governance environment of host countries. The findings support the pollution halo hypothesis in 31 developed countries with a good governance environment and the pollution haven hypothesis in 55 developing countries with a bad one using the two-step system GMM estimator from 2005 to 2018. Besides, the results indicate that the difference in the impact of economic growth on environmental quality between developed and developing countries approves the hypothesis of the environmental Kuznets curve. The robustness of these estimates is checked by the PMG estimator. These findings suggest some policy implications for developing countries in improving environmental quality.

Keywords: FDI; environmental pollution; developed countries; developing countries; environmental Kuznets curve; GMM estimator; PMG estimator (search for similar items in EconPapers)
JEL-codes: C23 F21 F64 Q56 Q58 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitjec:v:62:y:2021:i:2:p:124-140

DOI: 10.15057/hje.2021006

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