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Do greater amounts of FDI cause higher pollution levels? Evidence from OECD countries

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  • Marques, António Cardoso
  • Caetano, Rafaela Vital

Abstract

Using an ARDL model for a panel of 15 OECD countries, this work analyses the impact that FDI, both jointly and by sector, has on CO2 emissions. The findings reveal that these countries are yielding to the pressure on the trade sector. Unexpectedly, gross fixed capital formation shrink pollution, excluding in the mining sector. With findings supporting the Pollution Haven Hypothesis, policymakers must pay attention to FDI inflows, ensuring that FDI place high importance on the transfer of green technologies to improve the efficiency. These goals could be achieved through an increase in the stringency of environmental laws within the host countries, especially the ones related to FDI.

Suggested Citation

  • Marques, António Cardoso & Caetano, Rafaela Vital, 2022. "Do greater amounts of FDI cause higher pollution levels? Evidence from OECD countries," Journal of Policy Modeling, Elsevier, vol. 44(1), pages 147-162.
    • Handle: RePEc:eee:jpolmo:v:44:y:2022:i:1:p:147-162
    DOI: 10.1016/j.jpolmod.2021.10.004
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    2. Yusen Luo & Zhengnan Lu & Chao Wu & Claudia Nyarko Mensah, 2023. "Environmental Regulation Effect on Green Total Factor Productivity: Mediating Role of Foreign Direct Investment Quantity and Quality," IJERPH, MDPI, vol. 20(4), pages 1-18, February.
    3. Tan, Ruipeng & Xu, Mengmeng & Qiao, Gang & Wu, Huaqing, 2023. "FDI, financial market development and nonlinearities of energy and environmental efficiency in China: Evidence from both parametric and nonparametric models," Energy Economics, Elsevier, vol. 119(C).

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    More about this item

    Keywords

    Foreign direct investment; Carbon dioxide emissions; Pollution; Autoregressive distributed lag; Pollution Haven Hypothesis;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F18 - International Economics - - Trade - - - Trade and Environment
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • L7 - Industrial Organization - - Industry Studies: Primary Products and Construction
    • L8 - Industrial Organization - - Industry Studies: Services

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