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Does Foreign Direct Investment Harm the Environment in Developing Countries? Dynamic Panel Analysis of Latin American Countries

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  • Jungho Baek

    (Department of Economics, University of Alaska, Fairbanks, AK 99775-6080, USA)

  • Yoon Jung Choi

    (Global Strategy Research Center, Korea Trade-Investment Promotion Agency, Seoul 06792, Korea)

Abstract

This article sets out to study the FDI–environment nexus within a dynamic panel data framework. To that end, the pooled mean group (PMG) method of Pesaran et al. (1999) is used to assess the impact of FDI on CO 2 emissions, controlling for income and energy consumption, using a panel of 17 Latin American countries. Our results using the full sample show that FDI increases CO 2 emissions, confirming the pollution haven hypothesis. But when splitting the data into different income groups, FDI inflows only in high-income countries increase CO 2 emissions. In addition, CO 2 emissions with growth tend to increase monotonically within the full sample and middle-income countries. Finally, energy consumption is found to increase CO 2 emissions in all cases: the full sample, high-, middle- and low-income countries.

Suggested Citation

  • Jungho Baek & Yoon Jung Choi, 2017. "Does Foreign Direct Investment Harm the Environment in Developing Countries? Dynamic Panel Analysis of Latin American Countries," Economies, MDPI, vol. 5(4), pages 1-8, October.
    • Handle: RePEc:gam:jecomi:v:5:y:2017:i:4:p:39-:d:116002
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    Cited by:

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    5. Bai, Hanyu & Irfan, Muhammad & Hao, Yu, 2022. "How does industrial transfer affect environmental quality? Evidence from China," Journal of Asian Economics, Elsevier, vol. 82(C).
    6. Ali Çelik, 2023. "Testing Linear and Nonlinear Relationships Between Foreign Direct Investment and Fossil Energy Consumption in Fragile Five Countries," EKOIST Journal of Econometrics and Statistics, Istanbul University, Faculty of Economics, vol. 0(38), pages 1-77, June.

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