A Dynamic Approach to the FDI-Environment Nexus: The Case of China and India

A Dynamic Approach to the FDI-Environment Nexus: The Case of China and India

Jungho Baek and Won W. Koo

No 6508, 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: The cointegration analysis and a vector error-correction (VEC) model are applied to examine the short- and long-run relationships among foreign direct investment (FDI), economic growth, and the environment in China and India. The results show that FDI inflow plays a pivotal role in determining the short- and long-run movement of economic growth through capital accumulation and technical spillovers in the two countries. However, FDI inflow in both countries is found to have a detrimental effect on environmental quality in both the short- and long-run, supporting pollution haven hypothesis. Finally, it is found that, in the short-run, there exists a unidirectional causality from FDI inflow to economic growth and the environment in China and India - a change in FDI inflow causes a consequence change in environmental quality and economic growth, but the reverse does not hold.

Keywords: China; cointegration analysis; environment; FDI; India; vector error-correction; Research Methods/ Statistical Methods (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cwa and nep-tra
Date: 2008
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