The effect of FDI on environmental emissions: Evidence from a meta-analysis

Binyam Demena and Sylvanus Afesorgbor

No 650, ISS Working Papers - General Series from International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague

Abstract: One important and frequently-raised issue about foreign direct investment (FDI) is the potentially negative consequences for the environment. The potential environmental cost due to increased emissions may undermine the economic gains associated with increases in FDI inflow. Although the literature is dominated with this adverse view of FDI on the environment, there is also a possibility that FDI can contribute to a cleaner environment, especially, if FDI comes with green technologies and this creates spillovers for domestic industries. Theoretically, the effect of FDI on the environment can be negative or positive. To deal with the theoretical ambiguity about the FDI environment nexus, many empirical studies have been conducted but their results only reinforce the controversy as they produce contrasting results. We conduct a meta-analysis of the effect of FDI on environmental emissions using 65 primary studies that produce 1006 elasticities. Our results show that the underlying effect of FDI on environmental emissions is close to zero, however, after accounting for heterogeneity in the studies, we find that FDI significantly reduces environmental emissions. Results remain robust after disaggregating the effect for countries at different levels of development as well as for different pollutants.

Keywords: FDI; pollution haven hypothesis; pollution halo hypothesis; environment; emissions; meta-analysis (search for similar items in EconPapers)
JEL-codes: F21 F60 Q56 (search for similar items in EconPapers)
Pages: 45
Date: 2019-11-28
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://repub.eur.nl/pub/121765/wp650.pdf (application/pdf)

Related works:
Journal Article: The effect of FDI on environmental emissions: Evidence from a meta-analysis (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ems:euriss:121765

Access Statistics for this paper

More papers in ISS Working Papers - General Series from International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague Contact information at EDIRC.
Bibliographic data for series maintained by RePub ( this e-mail address is bad, please contact ).