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The impact of FDI on regional air pollution in the Republic of Korea: A way ahead to achieve the green growth strategy?

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  • Hille, Erik
  • Shahbaz, Muhammad
  • Moosa, Imad

Abstract

Can FDI help to reduce regional air pollution emissions in Korea? Given the proclamation of a far-reaching national green growth strategy that requires a shift in public and private investments, this paper addresses the need for empirical estimates on the environmental consequences of FDI inflows into Korea. Using a simultaneous equations model the impacts of FDI inflows are decomposed into direct as well as indirect scale, composition, and technique effects. Thereby, the analysis utilizes panel data on six air pollutants in 16 Korean provinces and self-governing cities for the period 2000 to 2011. The estimation results show that FDI inflows concurrently stimulate regional economic growth and reduce air pollution intensities. However, the total level of air emissions mostly remains unchanged. While confirming the findings of the existing national level research on the FDI-growth relationship in Korea, the results are partly contrary to the respective earlier findings on the FDI-environment nexus. Given Korea's high level of development paired with the aforementioned impact on economic growth and air pollution intensities, foreign investments are, therefore, regarded as one potential pillar to achieve the goals of the green growth strategy.

Suggested Citation

  • Hille, Erik & Shahbaz, Muhammad & Moosa, Imad, 2019. "The impact of FDI on regional air pollution in the Republic of Korea: A way ahead to achieve the green growth strategy?," Energy Economics, Elsevier, vol. 81(C), pages 308-326.
    • Handle: RePEc:eee:eneeco:v:81:y:2019:i:c:p:308-326
    DOI: 10.1016/j.eneco.2019.04.004
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    More about this item

    Keywords

    Foreign direct investments; Air pollution; Green growth; Decomposition analysis; Republic of Korea;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • 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

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