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Does foreign direct investment and environmental degradation matter for poverty? Evidence from developing countries

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  • Dhrifi, Abdelhafidh
  • Jaziri, Raouf
  • Alnahdi, Saleh

Abstract

This paper stains to investigate the causality between Foreign Direct Investment (FDI), Carbon dioxide emission (CO2) and poverty using simultaneous-equations models (SEM's) for a global panel of 98 developing countries over the period 1995–2017. We also implement these empirical models for three regions sub-panels: Asia, Africa and Latin America. Global panel results showed that there is a bi-directional causal relationship between FDI and poverty as well as CO2 emission and poverty. However, there is unidirectional causal relationship that runs from FDI to CO2 emission. Findings showed also a significant negative relationship between FDI and poverty for all groups of countries with the exception of the African panel. Other important results showed a negative impact of FDI on CO2 emission in African countries, an inverted U-shaped relationship between the two variables for Asian economies and a positive effect of FDI on environmental quality in Latin America.

Suggested Citation

  • Dhrifi, Abdelhafidh & Jaziri, Raouf & Alnahdi, Saleh, 2020. "Does foreign direct investment and environmental degradation matter for poverty? Evidence from developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 13-21.
    • Handle: RePEc:eee:streco:v:52:y:2020:i:c:p:13-21
    DOI: 10.1016/j.strueco.2019.09.008
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    More about this item

    Keywords

    Foreign direct investment; CO2 emission; Poverty;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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