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Do greater amounts of FDI cause higher pollution levels? Evidence from OECD countries

António Cardoso Marques and Rafaela Vital Caetano

Journal of Policy Modeling, 2022, vol. 44, issue 1, 147-162

Abstract: Using an ARDL model for a panel of 15 OECD countries, this work analyses the impact that FDI, both jointly and by sector, has on CO2 emissions. The findings reveal that these countries are yielding to the pressure on the trade sector. Unexpectedly, gross fixed capital formation shrink pollution, excluding in the mining sector. With findings supporting the Pollution Haven Hypothesis, policymakers must pay attention to FDI inflows, ensuring that FDI place high importance on the transfer of green technologies to improve the efficiency. These goals could be achieved through an increase in the stringency of environmental laws within the host countries, especially the ones related to FDI.

Keywords: Foreign direct investment; Carbon dioxide emissions; Pollution; Autoregressive distributed lag; Pollution Haven Hypothesis (search for similar items in EconPapers)
JEL-codes: F18 F2 L6 L7 L8 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.jpolmod.2021.10.004

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Handle: RePEc:eee:jpolmo:v:44:y:2022:i:1:p:147-162