Economic and environmental impacts of foreign direct investment in China: A spatial spillover analysis

Jianhuan Huang, Xudong Chen, Bihong Huang and Xiaoguang Yang

China Economic Review, 2017, vol. 45, issue C, 289-309

Abstract: This paper studies the economic and environmental impacts of foreign direct investment (FDI) in China. First, we build a simple theoretical model to predict the overall beneficial effects of FDI, and also find that a stronger sense of “environmental citizenship” by the FDI firm is associated with lower pollution and lower emission intensity in the host region. For empirical analysis, we use Spatial Durbin Model (SDM) to address the regional spillovers of FDI and pollution in China, and confirm the beneficial impacts of FDI both environmentally and economically. We also find that FDI from Hong Kong, Macau, and Taiwan (HMT) that is assumed to exhibit a stronger sense of environmental citizenship due to its closer ties with mainland China, significantly improves the host region's environmental outcome but has no measurable effects on its economic growth; in contrast, FDI from other origins significantly promotes the economic growth of the host economy although it has no measurable impacts on the environmental outcome.

Keywords: Foreign direct investment; Spatial spillover effect; Environmental outcome; Economic growth; Environmental citizenship (search for similar items in EconPapers)
JEL-codes: F21 Q53 Q56 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (35)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:45:y:2017:i:c:p:289-309

DOI: 10.1016/j.chieco.2016.03.006

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