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FDI and Environmental Sustainability Nexus: Testing the Pollution Haven Hypothesis in the Presence of Regulatory Quality

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  • Yakubu, Ibrahim Nandom
  • Musah, Alhassan

Abstract

In this study, we examine the relationship between foreign direct investment (FDI) and environmental pollution within the context of the pollution haven hypothesis (PHH) in Ghana. We also investigate the role of regulatory quality in the FDI-pollution linkage. The study employs quarterly data spanning the period 2000Q1-2017Q4 and applies the fully modified least squares (FMOLS) technique. The empirical results show that FDI inflows significantly and positively drive environmental pollution. This result holds in the presence of regulatory quality. Accordingly, we confirm the validity of the pollution haven hypothesis in Ghana. The study also finds that industrialization increases pollution given its significant positive relationship with ecological footprint. We discuss relevant policy implications.

Suggested Citation

  • Yakubu, Ibrahim Nandom & Musah, Alhassan, 2022. "FDI and Environmental Sustainability Nexus: Testing the Pollution Haven Hypothesis in the Presence of Regulatory Quality," MPRA Paper 115410, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:115410
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    References listed on IDEAS

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    5. Shahbaz, Muhammad & Balsalobre-Lorente, Daniel & Sinha, Avik, 2019. "Foreign Direct Investment–CO2 Emissions Nexus in Middle East and North African countries: Importance of Biomass Energy Consumption," MPRA Paper 91729, University Library of Munich, Germany, revised 19 Jan 2019.
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    More about this item

    Keywords

    FDI; Pollution haven hypothesis; Ecological footprint; FMOLS; Ghana;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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