Do human capital and governance thresholds matter for the environmental impact of fdi? The evidence from mena countries

Fatma Taşdemir and Seda Özçelik ()
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Seda Özçelik: Ankara Yildirim Beyazit University

No 1608, Working Papers from Economic Research Forum

Abstract: This paper investigates whether the impact of foreign direct investment (FDI) on CO2 emissions may change depending on the data-driven estimated threshold levels for the country characteristics (CC) including human capital and governance in a panel of 13 Middle East and North Africa (MENA) economies over the 1996-2019 period. Our results strongly suggest that endogenously estimated CC thresholds matter for the environmental impact of FDI inflows. The pollution haven hypothesis which maintains that FDI inflows lead to pollution, appears to be valid for economies with weak CC. On the other hand, the pollution halo argument suggesting FDI lowers the emissions appears to be hold in countries with strong CC. The empirical findings in this study suggest that policies aiming to improve human capital and governance may be expected not only to increase the economic benefits of FDI in terms of growth but also mitigate the negative environmental impacts of FDI in the MENA region.

Pages: 20
Date: 2022-11-20, Revised 2022-11-20
New Economics Papers: this item is included in nep-ara, nep-env and nep-int
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Published by The Economic Research Forum (ERF)

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