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Does FDI Bring Environmental Knowledge Spillovers to Developing Countries? The Role of the Local Industrial Structure

Lutao Ning () and Fan Wang ()
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Lutao Ning: University of London
Fan Wang: University of London

Environmental & Resource Economics, 2018, vol. 71, issue 2, 381-405

Abstract: Abstract This paper examines the environmental knowledge externalities of FDI within and across cities in an emerging economy context. It argues that the extent of these environmental externalities is contingent upon local industrial agglomeration. Using a panel dataset of 280 Chinese prefectural cities from 2003 to 2012, we employ a spatial economic approach. Although limited to evidence from soot and $$\hbox {SO}_{2}$$ SO 2 pollutants, our results suggest that FDI brings overall positive environmental knowledge externalities to a region, and also spillovers to nearby regions. Specialised cities may lock into a particular technological path, attenuating the absorption and diffusion of a variety of FDI environmental knowledge. Conversely, diversified cities promote cross-fertilisation of environmental knowledge and mitigate local pollution intensity at the aggregated city level. This study adds to the literature by highlighting the importance of considering both the spatiality of FDI and industrial structure in understanding FDI environmental knowledge spillovers.

Keywords: Foreign direct investment; Pollution; Industrial agglomeration; Specialisation; Diversity; China (search for similar items in EconPapers)
JEL-codes: L52 O33 O53 R12 R58 (search for similar items in EconPapers)
Date: 2018
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