Foreign direct investment, environmentally sound technology and informal sector
AbstractThe paper examines the linkages between foreign direct investment, informal sector and transfer of environmentally sound technology (EST) in a developing economy in terms of a three-sector, full-employment general equilibrium model with an informal sector that produces a non-traded input for the formal final good producing sector. The same input is produced by another division of the formal sector, which generates less pollution than the informal sector since the former uses a different type of capital that embodies EST. The formal sector has to pay a penalty in the form of a production tax for using the output of the excessively polluting informal sector. In this scenario, the analysis finds that foreign capital inflow in the formal sector may accentuate pollution, even if it involves transfer of EST. Secondly, there might exist a positive relationship between pollution and national income in the economy both in the presence and absence of transfer of EST. These results can at least question the desirability of transfer of EST and also give theoretical explanations behind the existence of a positively sloped segment in the Environmental Kuznets Curve.
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.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 31447.
Date of creation: 17 May 2011
Date of revision:
Pollution; foreign capital; environmentally sound technology; informal sector; formal sector; Environmental Kuznets Curve; general equilibrium;
Other versions of this item:
- Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2013. "Foreign direct investment, environmentally sound technology and informal sector," Economic Modelling, Elsevier, vol. 31(C), pages 206-213.
- F18 - International Economics - - Trade - - - Trade and Environment
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
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.:
- Jie HE, 2005.
"Pollution haven hypothesis and Environmental impacts of foreign direct investment: The Case of Industrial Emission of Sulfur Dioxide (SO2) in Chinese provinces,"
- He, Jie, 2006. "Pollution haven hypothesis and environmental impacts of foreign direct investment: The case of industrial emission of sulfur dioxide (SO2) in Chinese provinces," Ecological Economics, Elsevier, vol. 60(1), pages 228-245, November.
- Cristina Tébar Less & Steven McMillan, 2005. "Achieving the Successful Transfer of Environmentally Sound Technologies: Trade-related Aspects," OECD Trade and Environment Working Papers 2005/2, OECD Publishing.
- Erik Dietzenbacher & Kakali Mukhopadhyay, 2007. "An Empirical Examination of the Pollution Haven Hypothesis for India: Towards a Green Leontief Paradox?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 36(4), pages 427-449, April.
- Eskeland, Gunnar S. & Harrison, Ann E., 2003.
"Moving to greener pastures? Multinationals and the pollution haven hypothesis,"
Journal of Development Economics,
Elsevier, vol. 70(1), pages 1-23, February.
- Gunnar A. Eskeland & Ann E. Harrison, 2002. "Moving to Greener Pastures? Multinationals and the Pollution Haven Hypothesis," NBER Working Papers 8888, National Bureau of Economic Research, Inc.
- Eskeland, Gunnar S. & Harrison, Ann E., 1997. "Moving to greener pastures : multinationals and the pollution-haven hypothesis," Policy Research Working Paper Series 1744, The World Bank.
- 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.
- Barrett, Scott & Graddy, Kathryn, 2000. "Freedom, growth, and the environment," Environment and Development Economics, Cambridge University Press, vol. 5(04), pages 433-456, October.
- Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2006. "Pollution and Informal Sector: A Theoretical Analysis," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 363-378.
- Sarbajit Chaudhuri, 2005.
"Foreign Capital Inflow, Non-Traded Intermediary, Urban Unemployment And Welfare In A Small Open Economy: A Theoretical Analysis,"
- Sarbajit Chaudhuri, 2001. "Foreign Capital Inflow, Non-traded Intermediary, Urban Unemployment, and Welfare in a Small Open Economy: A Theoretical Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(3), pages 225-235.
- Beckerman, Wilfred, 1992. "Economic growth and the environment: Whose growth? whose environment?," World Development, Elsevier, vol. 20(4), pages 481-496, April.
- Hamid Beladi & Sugata Marjit, 1992.
"Foreign Capital and Protectionism,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 25(1), pages 233-38, February.
- Chandra, Vandana & Khan, M Ali, 1993. "Foreign Investment in the Presence of an Informal Sector," Economica, London School of Economics and Political Science, vol. 60(237), pages 79-103, February.
- Brecher, Richard A. & Diaz Alejandro, Carlos F., 1977. "Tariffs, foreign capital and immiserizing growth," Journal of International Economics, Elsevier, vol. 7(4), pages 317-322, November.
- Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2009. "Revisiting the Informal Sector: A General Equilibrium Approach," MPRA Paper 52135, University Library of Munich, Germany.
- Khan, M. Ali, 1982. "Tariffs, foreign capital and immiserizing growth with urban unemployment and specific factors of production," Journal of Development Economics, Elsevier, vol. 10(2), pages 245-256, April.
- Sarbajit Chaudhuri, 2001. "Foreign Capital Inflow, Technology Transfer, and National Income," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(1), pages 49-56.
- Luken, Ralph & Van Rompaey, Frank & Zigová, Katarina, 2008. "The determinants of EST adoption by manufacturing plants in developing countries," Ecological Economics, Elsevier, vol. 66(1), pages 141-152, May.
- Gupta, Manash Ranjan, 1997. "Foreign Capital and the Informal Sector: Comments," Economica, London School of Economics and Political Science, vol. 64(254), pages 353-63, May.
- Selim Cagatay & Hakan Mihci, 2006. "Degree of environmental stringency and the impact on trade patterns," Journal of Economic Studies, Emerald Group Publishing, vol. 33(1), pages 30-51, January.
- Grinols, Earl L, 1991. "Unemployment and Foreign Capital: The Relative Opportunity Costs of Domestic Labour and Welfare," Economica, London School of Economics and Political Science, vol. 58(229), pages 107-21, February.
- Mandal, Biswajit, 2014. "Trade Reform, Environment and Intermediation: Implication for Health Standard," MPRA Paper 56524, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.