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A Dynamic Approach to the FDI-Environment Nexus: The Case of China and India

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  • Baek, Jungho
  • Koo, Won W.

Abstract

The cointegration analysis and a vector error-correction (VEC) model are applied to examine the short- and long-run relationships among foreign direct investment (FDI), economic growth, and the environment in China and India. The results show that FDI inflow plays a pivotal role in determining the short- and long-run movement of economic growth through capital accumulation and technical spillovers in the two countries. However, FDI inflow in both countries is found to have a detrimental effect on environmental quality in both the short- and long-run, supporting pollution haven hypothesis. Finally, it is found that, in the short-run, there exists a unidirectional causality from FDI inflow to economic growth and the environment in China and India - a change in FDI inflow causes a consequence change in environmental quality and economic growth, but the reverse does not hold.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida with number 6508.

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Date of creation: 2008
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Handle: RePEc:ags:aaea08:6508

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Keywords: China; cointegration analysis; environment; FDI; India; vector error-correction; Research Methods/ Statistical Methods;

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Cited by:
  1. Jing Lan & Makoto Kakinaka & Xianguo Huang, 2012. "Foreign Direct Investment, Human Capital and Environmental Pollution in China," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 51(2), pages 255-275, February.
  2. Michael Keren, 2009. "China and India - a Note on the Influence of Hierarchy vs. Polyarchy on Economic Growth," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 6(2), pages 325-346, December.

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