How Do Economic Growth and Foreign Direct Investment Affect Environmental Quality? New Evidence from Nineteen Asian Countries

Khadhraoui Soukaina () and Rabeb Kammoun ()
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Khadhraoui Soukaina: Economy and Development Laboratory, Faculty of Economics and Management of Sfax
Rabeb Kammoun: Department of Competitiveness, Business Decision and Internationalization, Faculty of Economics and Management of Sfax

Journal of the Knowledge Economy, 2025, vol. 16, issue 4, No 49, 15186-15227

Abstract: Abstract The aim of this study has been to assess the impact of foreign direct investment, energy consumption, income, renewable energy, trade openness, and population size on carbon emissions in a panel of nineteen Asian countries, observed over the period ranging from 1990 to 2020, approached via GMM technique. Additionally, for the purpose of estimating our dynamic panel data model, we considered applying the OLS, fixed, and random effects techniques for static panels. Noteworthy, also, is that we have undertaken to examine this relationship with respect to three sub-group sets, categorized according to income levels, namely, high-income, middle-income, and low-income countries. On applying the dynamic model, it turned out that GDP per capita, energy consumption level, usage of renewable energy, and population size ended up displaying a significant and positive effect on the rates of CO2 emission in regard to the three subgroups under review. Similarly, the GDP square coefficient ended up exhibiting an unfavorable effect on the environmental quality dimension. As to FDI, the impact was predominantly positive and significant at the threshold of 1% regarding the high-income and middle-income countries. As regards the low-income countries’ subgroup, however, the FDI’s effect turned out to be significant, still within a lower level, i.e., at a 10% threshold. Such a result should indicate that economically weaker Asian countries might be liable to release lower CO2 emission rates with respect to their wealthier counterparts, owing mainly to restricted industrialization scopes.

Keywords: Energy consumption; Foreign direct investment; Income; Trade; Population on carbon emission; Panel; GMM (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s13132-024-02378-x

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