The impact of FDI on air quality: evidence from China
AbstractPurpose – This paper seeks to examine the impact of foreign direct investments (FDI) on air pollution in China using 286 cities from 2001 to 2007. It is a particular interest of this paper to observe the relationship between FDI and air pollution in particular after China joined to World Trade Organization in 2001. This paper provides a better understanding of economic growth and foreign investment while maintaining a sustainable environment. In order to achieve this task, this paper tests whether or not FDI inflow has impact on environmental deterioration in particular on air quality. Design/methodology/approach – Since the data are both cross-sectional and time series, panel data analyses (fixed effects and random effects) were applied. In order to detect the presence of serial correlation of error term, Durbin-Watson test was used. As serial correlation problem was determined, generalized least square (GLS) using Ar(1) model was used to overcome serial correlation. Findings – The findings show that FDI has no negative impact on the air quality in China. Contrary to expectations, the presence of FDI reduces the air pollution. This result can be attributed by the role of FDIs in the economy that FDIs are perceived as main sources of advanced technology in China. One of the striking findings of the paper shows that FDI has no significant impact on air quality in the central and western cities. The reason is that low level of FDI inflows to cities located in the Center and West. The findings are robust under both panel data (fixed effects and random effects) and GLS estimations. Practical implications – The results provide a wide array of information useful to practitioners, policy makers. Since the paper shows that FDI has no negative impact on the air quality, this result is crucial in attracting FDI to China. Originality/value – This paper provides the largest sample including 286 cities all over China from 2001 to 2007. Considering the distribution of FDI across China, the sample is divided into three regions. Making sub-samples of the FDI distribution allowed us to examine how the impact of FDI differs on air quality in the East, Central and West regions. JEL classification: O13, O18, Q25, O53, R1, F23
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Emerald Group Publishing in its journal Journal of Chinese Economic and Foreign Trade Studies.
Volume (Year): 4 (2011)
Issue (Month): 2 (June)
Contact details of provider:
Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Find related papers by JEL classification:
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
- R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- WHALLEY, John & XIN, Xian, 2010.
"China's FDI and non-FDI economies and the sustainability of future high Chinese growth,"
China Economic Review,
Elsevier, vol. 21(1), pages 123-135, March.
- John Whalley & Xian Xin, 2006. "China's FDI and Non-FDI Economies and the Sustainability of Future High Chinese Growth," NBER Working Papers 12249, National Bureau of Economic Research, Inc.
- Gene M. Grossman & Alan B. Krueger, 1991.
"Environmental Impacts of a North American Free Trade Agreement,"
NBER Working Papers
3914, National Bureau of Economic Research, Inc.
- Grossman, Gene & Krueger, Alan B, 1992. "Environmental Impacts of a North American Free Trade Agreement," CEPR Discussion Papers 644, C.E.P.R. Discussion Papers.
- Grossman, G.M & Krueger, A.B., 1991. "Environmental Impacts of a North American Free Trade Agreement," Papers 158, Princeton, Woodrow Wilson School - Public and International Affairs.
- Brian R. Copeland & M. Scott Taylor, 2003.
"Trade, Growth and the Environment,"
NBER Working Papers
9823, National Bureau of Economic Research, Inc.
- Fan, Joseph P.H. & Morck, Randall & Xu, Lixin Colin & Yeung, Bernard, 2009. "Institutions and Foreign Direct Investment: China versus the Rest of the World," World Development, Elsevier, vol. 37(4), pages 852-865, April.
- Wang, Hua & Wheeler, David, 2003. "Equilibrium pollution and economic development in China," Environment and Development Economics, Cambridge University Press, vol. 8(03), pages 451-466, July.
- Susmita Dasgupta & Benoit Laplante & Hua Wang & David Wheeler, 2002. "Confronting the Environmental Kuznets Curve," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 147-168, Winter.
- Yuqing Xing, 2008. "FDI in China: Facts and Impacts on China and the World Economy," Working Papers EMS_2008_03, Research Institute, International University of Japan.
- Honglin Zhang, Kevin, 2005. "Why does so much FDI from Hong Kong and Taiwan go to Mainland China?," China Economic Review, Elsevier, vol. 16(3), pages 293-307.
- Yao, Shujie & Wei, Kailei, 2007. "Economic growth in the presence of FDI: The perspective of newly industrialising economies," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 211-234, March.
- Hua Wang & Yanhong Jin, 2007.
"Industrial Ownership and Environmental Performance: Evidence from China,"
Environmental & Resource Economics,
European Association of Environmental and Resource Economists, vol. 36(3), pages 255-273, March.
- Hua Wang & Yanhong Jin, 2002. "Industrial ownership and environmental performance : evidence from China," Policy Research Working Paper Series 2936, The World Bank.
- Selden Thomas M. & Song Daqing, 1994. "Environmental Quality and Development: Is There a Kuznets Curve for Air Pollution Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 147-162, September.
- Grossman, Gene M & Krueger, Alan B, 1995.
"Economic Growth and the Environment,"
The Quarterly Journal of Economics,
MIT Press, vol. 110(2), pages 353-77, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Harris).
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.