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Does China's outward foreign direct investment improve carbon emission Efficiency? The heterogeneous impact of economic development

Author

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  • Wang, Ailun
  • Si, Lulu
  • Hu, Shuo

Abstract

Few studies have examined the role of economic development in the heterogeneous impact of Chinese outward foreign direct investment on carbon emission efficiency in BRI countries. This paper addresses this gap by employing a one-stage stochastic frontier analysis and a two-stage data envelopment analysis that consider non-linear effects, using data from 129 BRI countries between 2003 and 2019. To mitigate potential endogeneity issues, the study utilizes instrumental variable methods. Empirical findings indicate that higher levels of economic development are associated with a more significant positive effect of Chinese outward foreign direct investment on improving carbon emission efficiency. Additionally, institutional quality, entry costs, and entry time differentially influence how economic development levels impact carbon emission efficiency. The paper argues that China should actively support BRI countries in enhancing economic development, institutional quality, and reducing operating costs to foster improvements in carbon emission efficiency.

Suggested Citation

  • Wang, Ailun & Si, Lulu & Hu, Shuo, 2025. "Does China's outward foreign direct investment improve carbon emission Efficiency? The heterogeneous impact of economic development," Energy Policy, Elsevier, vol. 204(C).
    • Handle: RePEc:eee:enepol:v:204:y:2025:i:c:s0301421525001855
    DOI: 10.1016/j.enpol.2025.114678
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