Foreign Direct Investment and Environmental Pollution: New Evidence from China

Meng Yan and Zhen An
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Meng Yan: (Corresponding Author) Department of Economics, University of New Hampshire,10 Garrison Avenue, Durham, NH, USA, 03820, e-mail: my1019@wildcats.unh.edu.
Zhen An: School of Business, University of Connecticut, 1 University Plaza, Stamford, CT, USA, 06901, e-mail: zhenan548@gmail.com

Econometrics Letters, 2017, vol. 4, issue 1, 1-17

Abstract: This paper investigates the relationship between FDI and environmental pollution based on 30 provincial capital cities data from China and exploits the possible mechanisms that cause specific pattern between FDI and environmental pollution. According to panel data model with and without technological progress, the relationship between FDI and sulfur dioxide exhibits inverted U-shaped pattern, yet there is no certain pattern between FDI and PM10 under two circumstances, in the meanwhile, the quadratic relationship between FDI and nitrogen dioxide disappears once incorporating technological progress. This paper further estimates such relationship by utilizing panel threshold model and concludes the impact of FDI on the emission of PM10 exhibits N-shaped pattern rather than usual U-shaped pattern, the relationship between FDI and sulfur dioxide may exist inverted V or U-shaped pattern and there is no any specific relationship between FDI and nitrogen dioxide. Theoretically, production scale effect, technique effect and regulation effect brought by FDI jointly determine the impact of FDI on environmental pollution and latter two effects will relieve the environmental deterioration in the long run.

Keywords: Economic Growth; FDI; Environmental pollution; Panel Threshold Model. (search for similar items in EconPapers)
JEL-codes: C23 F21 Q56 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (62)

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