Foreign direct investment, environmentally sound technology and informal sector
AbstractThe 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.
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Bibliographic InfoArticle provided by Elsevier in its journal Economic Modelling.
Volume (Year): 31 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/30411
Pollution; Foreign capital; Environmentally sound technology; Informal sector; Formal sector; General equilibrium;
Other versions of this item:
- Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2011. "Foreign direct investment, environmentally sound technology and informal sector," MPRA Paper 31447, University Library of Munich, Germany.
- F18 - International Economics - - Trade - - - Trade and Environment
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; 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
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