IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v31y2013icp206-213.html
   My bibliography  Save this article

Foreign direct investment, environmentally sound technology and informal sector

Author

Listed:
  • Chaudhuri, Sarbajit
  • Mukhopadhyay, Ujjaini

Abstract

The paper examines the linkages between foreign direct investment, informal sector and transfer of environmentally sound technology (EST) in a developing economy in terms of a three-sector, full-employment general equilibrium model with an informal sector that produces a non-traded input for the formal final good producing sector. The same input is produced by another division of the formal sector, which generates less pollution than the informal sector since the former uses a different type of capital that embodies EST. The formal sector has to pay a penalty for using the output of the excessively polluting informal sector. In this scenario, the analysis finds that foreign capital inflow in the formal sector may accentuate pollution, even if it involves transfer of EST. This result can at least question the favorable environmental impact of FDI in a developing economy even if it involves transfer of EST.

Suggested Citation

  • Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2013. "Foreign direct investment, environmentally sound technology and informal sector," Economic Modelling, Elsevier, vol. 31(C), pages 206-213.
    • Handle: RePEc:eee:ecmode:v:31:y:2013:i:c:p:206-213
    DOI: 10.1016/j.econmod.2012.11.023
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999312003793
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2012.11.023?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Beckerman, Wilfred, 1992. "Economic growth and the environment: Whose growth? whose environment?," World Development, Elsevier, vol. 20(4), pages 481-496, April.
    2. Khan, M. Ali, 1982. "Tariffs, foreign capital and immiserizing growth with urban unemployment and specific factors of production," Journal of Development Economics, Elsevier, vol. 10(2), pages 245-256, April.
    3. Brecher, Richard A. & Diaz Alejandro, Carlos F., 1977. "Tariffs, foreign capital and immiserizing growth," Journal of International Economics, Elsevier, vol. 7(4), pages 317-322, November.
    4. Gene M. Grossman & Alan B. Krueger, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 353-377.
    5. Erik Dietzenbacher & Kakali Mukhopadhyay, 2007. "An Empirical Examination of the Pollution Haven Hypothesis for India: Towards a Green Leontief Paradox?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 36(4), pages 427-449, April.
    6. He, Jie, 2006. "Pollution haven hypothesis and environmental impacts of foreign direct investment: The case of industrial emission of sulfur dioxide (SO2) in Chinese provinces," Ecological Economics, Elsevier, vol. 60(1), pages 228-245, November.
    7. Eskeland, Gunnar S. & Harrison, Ann E., 2003. "Moving to greener pastures? Multinationals and the pollution haven hypothesis," Journal of Development Economics, Elsevier, vol. 70(1), pages 1-23, February.
    8. Selim Cagatay & Hakan Mihci, 2006. "Degree of environmental stringency and the impact on trade patterns," Journal of Economic Studies, Emerald Group Publishing, vol. 33(1), pages 30-51, January.
    9. Grinols, Earl L, 1991. "Unemployment and Foreign Capital: The Relative Opportunity Costs of Domestic Labour and Welfare," Economica, London School of Economics and Political Science, vol. 58(229), pages 107-121, February.
    10. Barrett, Scott & Graddy, Kathryn, 2000. "Freedom, growth, and the environment," Environment and Development Economics, Cambridge University Press, vol. 5(4), pages 433-456, October.
    11. Hamid Beladi & Sugata Marjit, 1992. "Foreign Capital and Protectionism," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 233-238, February.
    12. Cristina Tébar Less & Steven McMillan, 2005. "Achieving the Successful Transfer of Environmentally Sound Technologies: Trade-related Aspects," OECD Trade and Environment Working Papers 2005/2, OECD Publishing.
    13. Sarbajit Chaudhuri, 2001. "Foreign Capital Inflow, Non-traded Intermediary, Urban Unemployment, and Welfare in a Small Open Economy: A Theoretical Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(3), pages 225-235.
    14. Luken, Ralph & Van Rompaey, Frank & Zigová, Katari­na, 2008. "The determinants of EST adoption by manufacturing plants in developing countries," Ecological Economics, Elsevier, vol. 66(1), pages 141-152, May.
    15. Chandra, Vandana & Khan, M Ali, 1993. "Foreign Investment in the Presence of an Informal Sector," Economica, London School of Economics and Political Science, vol. 60(237), pages 79-103, February.
    16. Sarbajit Chaudhuri, 2001. "Foreign Capital Inflow, Technology Transfer, and National Income," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(1), pages 49-56.
    17. Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2009. "Revisiting the Informal Sector: A General Equilibrium Approach," MPRA Paper 52135, University Library of Munich, Germany.
    18. Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2006. "Pollution and Informal Sector: A Theoretical Analysis," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 363-378.
    19. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    20. Gupta, Manash Ranjan, 1997. "Foreign Capital and the Informal Sector: Comments," Economica, London School of Economics and Political Science, vol. 64(254), pages 353-363, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xiang Cao & Ping Wang & Bangzhu Zhu, 2018. "Has foreign direct investment increased air pollution in China? A hierarchical linear model approach," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 91(2), pages 659-669, March.
    2. T. Bhavan, 2023. "The Nexus Between Foreign Direct Investment, Informal and Formal Sectors in Sri Lanka," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 24(1), pages 7-19, March.
    3. Ceyhun Elgin, 2021. "Foreign direct investment, informality and technology transfer," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 994-1015, May.
    4. Wang, Xiuli, 2023. "Exploring the role of resource industry dependence and green finance in green development efficiency in the context of post-Covid-19 period," Resources Policy, Elsevier, vol. 85(PB).
    5. Mandal, Biswajit, 2014. "Trade Reform, Environment and Intermediation: Implication for Health Standard," MPRA Paper 56524, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chaudhuri, Sarbajit, 2014. "Foreign capital, non-traded goods and welfare in a developing economy in the presence of externalities," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 249-262.
    2. Somasree Poddar & Sarbajit Chaudhuri, 2016. "Economic Reforms and Gender-Based Wage Inequality in the Presence of Factor Market Distortions," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 14(2), pages 301-321, December.
    3. Sarbajit Chaudhuri & Arnab Ghosh & Sattiki Deb, 2018. "Foreign Direct Investment and Rural Farm and Nonfarm Sectors in a Developing Economy," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(3), pages 787-810, September.
    4. Somasree Podder, 2018. "Gender Wage Inequality and Economic Recession," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(1), pages 155-171, March.
    5. M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," Labor Economics Working Papers 22206, East Asian Bureau of Economic Research.
    6. Sarbajit Chaudhuri, 2016. "Trade Unionism and Welfare Consequences of Trade and Investment Reforms in A Developing Economy," Metroeconomica, Wiley Blackwell, vol. 67(1), pages 152-171, February.
    7. Chaudhuri, Sarbajit, 2007. "Foreign capital, welfare and urban unemployment in the presence of agricultural dualism," Japan and the World Economy, Elsevier, vol. 19(2), pages 149-165, March.
    8. Ghosh, Sujata & Mandal, Biswajit & Gupta, Kausik, 2017. "Economic Liberalization and urban unemployment in the presence of informal sector," MPRA Paper 87463, University Library of Munich, Germany.
    9. Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2009. "Revisiting the Informal Sector: A General Equilibrium Approach," MPRA Paper 52135, University Library of Munich, Germany.
    10. Sarbajit Chaudhuri, 2005. "Pollution And Welfare In The Presence Of Informal Sector: Is There Any Trade-Off?," Others 0510012, University Library of Munich, Germany.
    11. Chatterjee, Tonmoy & Gupta, Kausik, 2013. "Trade in Health Services and Globalization: The Role of Infinitesimal Changes of Trade Policy," MPRA Paper 57343, University Library of Munich, Germany.
    12. Sarbajit Chaudhuri, 2003. "How and how far to liberalize a developing economy with informal sector and factor market distortions," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 12(4), pages 403-428.
    13. Chaudhuri, Sarbajit & Mukherjee, Ujjaini, 2002. "Removal of protectionism, foreign investment and welfare in a model of informal sector," Japan and the World Economy, Elsevier, vol. 14(1), pages 101-116, January.
    14. Sarbajit Chaudhuri, 2001. "Foreign Capital Inflow, Non-traded Intermediary, Urban Unemployment, and Welfare in a Small Open Economy: A Theoretical Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(3), pages 225-235.
    15. Chatterjee, Tonmoy & Gupta, Kausik, 2014. "Trade Policies, Health Care and Social Welfare: A General Equilibrium Analysis," MPRA Paper 57315, University Library of Munich, Germany.
    16. Sarbajit Chaudhuri, 2001. "Foreign Capital Inflow, Technology Transfer, and National Income," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(1), pages 49-56.
    17. Sarbajit Chaudhuri, 2005. "Labour Market Distortion, Technology Transfer And Gainful Effects Of Foreign Capital," Manchester School, University of Manchester, vol. 73(2), pages 214-227, March.
    18. Chaudhuri, Sarbajit, 2014. "How can trade unionism affect welfare consequences of trade and investment reforms in a developing economy?," MPRA Paper 59063, University Library of Munich, Germany.
    19. Chatterjee, Tonmoy & Gupta, Kausik, 2013. "Mobility of Capital and Health Sector:A Trade Theoretic Analysis," MPRA Paper 48557, University Library of Munich, Germany.
    20. Mukherjee, Soumyatanu, 2012. "Revisiting the Apparent Paradox: Foreign Capital Inflow, Welfare Amelioration and ‘Jobless Growth’ with Agricultural Dualism and Non-traded Intermediate Input," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 27, pages 123-133.

    More about this item

    Keywords

    Pollution; Foreign capital; Environmentally sound technology; Informal sector; Formal sector; General equilibrium;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:31:y:2013:i:c:p:206-213. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.