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The Environmental Cost of Attracting FDI: An Empirical Investigation in Brazil

Eduardo Polloni-Silva (), Guilherme Augusto Roiz (), Enzo Barberio Mariano (), Herick Fernando Moralles () and Daisy Aparecida Nascimento Rebelatto ()
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Eduardo Polloni-Silva: Department of Production Engineering (DEP), Federal University of São Carlos (UFSCar), São Carlos 13565-905, Brazil
Guilherme Augusto Roiz: Department of Production Engineering, Escola de Engenharia de São Carlos (EESC), University of São Paulo (USP), São Carlos 05508-270, Brazil
Enzo Barberio Mariano: Department of Production Engineering, School of Engineering of Bauru, Campus Bauru, São Paulo State University (UNESP), Bauru 14800-903, Brazil
Herick Fernando Moralles: Department of Production Engineering (DEP), Federal University of São Carlos (UFSCar), São Carlos 13565-905, Brazil
Daisy Aparecida Nascimento Rebelatto: Department of Production Engineering, Escola de Engenharia de São Carlos (EESC), University of São Paulo (USP), São Carlos 05508-270, Brazil

Sustainability, 2022, vol. 14, issue 8, 1-14

Abstract: Many emerging economies seek to increase their Foreign Direct Investment (FDI) inflows to achieve some promised benefits, such as economic growth and advanced technologies. Nevertheless, FDI does not represent a random investment decision, and international literature demonstrates that foreign investors are mostly interested in fast-growing regions. Therefore, this study uses traditional panel data econometrics coupled with Data Envelopment Analysis (DEA) to investigate the environmental impact in regions with great potential to attract foreign investments (e.g., more advanced regions with growing infrastructure), therefore analyzing the environmental cost of attracting FDI. Additionally, this study employs regional data from the ‘Atlas of FDI in the State of São Paulo’ to investigate the environmental effects of FDI in the periphery, where attractiveness levels are low. The results indicate that regions with higher attractiveness levels prepare a pollutant development strategy and that FDI in less-developed regions is harmful to the environment. The results point to new perspectives on the FDI–environment debate and suggest that attracting FDI is environmentally costly. Also, FDI is heterogeneous, with its presence in peripheral areas being harmful to the environment. To conclude, we discuss these results and present an agenda for future research.

Keywords: environment; CO 2; Foreign Direct Investment (FDI); econometrics; Data Envelopment Analysis (DEA); Brazil; Latin America (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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