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Foreign Direct Investment and Environmental Pollution: New Evidence from China

Author

Listed:
  • Meng Yan

    ((Corresponding Author) Department of Economics, University of New Hampshire,10 Garrison Avenue, Durham, NH, USA, 03820, e-mail: my1019@wildcats.unh.edu.)

  • Zhen An

    (School of Business, University of Connecticut, 1 University Plaza, Stamford, CT, USA, 06901, e-mail: zhenan548@gmail.com)

Abstract

This paper investigates the relationship between FDI and environmental pollution based on 30 provincial capital cities data from China and exploits the possible mechanisms that cause specific pattern between FDI and environmental pollution. According to panel data model with and without technological progress, the relationship between FDI and sulfur dioxide exhibits inverted U-shaped pattern, yet there is no certain pattern between FDI and PM10 under two circumstances, in the meanwhile, the quadratic relationship between FDI and nitrogen dioxide disappears once incorporating technological progress. This paper further estimates such relationship by utilizing panel threshold model and concludes the impact of FDI on the emission of PM10 exhibits N-shaped pattern rather than usual U-shaped pattern, the relationship between FDI and sulfur dioxide may exist inverted V or U-shaped pattern and there is no any specific relationship between FDI and nitrogen dioxide. Theoretically, production scale effect, technique effect and regulation effect brought by FDI jointly determine the impact of FDI on environmental pollution and latter two effects will relieve the environmental deterioration in the long run.

Suggested Citation

  • Meng Yan & Zhen An, 2017. "Foreign Direct Investment and Environmental Pollution: New Evidence from China," Econometrics Letters, Bilimsel Mektuplar Organizasyonu (Scientific letters), vol. 4(1), pages 1-17.
  • Handle: RePEc:bmo:bmoart:v:4:y:2017:i:1:p:1-17
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    References listed on IDEAS

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    1. repec:spr:envpol:v:20:y:2018:i:4:d:10.1007_s10018-018-0215-z is not listed on IDEAS
    2. 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.
    3. Matthew A. COLE & Robert R.J. ELLIOTT & OKUBO Toshihiro & Liyun ZHANG, 2017. "The Pollution Outsourcing Hypothesis: An empirical test for Japan," Discussion papers 17096, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    Keywords

    Economic Growth; FDI; Environmental pollution; Panel Threshold Model.;

    JEL classification:

    • 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
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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