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Do greater amounts of FDI cause higher pollution levels? Evidence from OECD countries

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  • Marques, António Cardoso
  • Caetano, Rafaela Vital

Abstract

Using an ARDL model for a panel of 15 OECD countries, this work analyses the impact that FDI, both jointly and by sector, has on CO2 emissions. The findings reveal that these countries are yielding to the pressure on the trade sector. Unexpectedly, gross fixed capital formation shrink pollution, excluding in the mining sector. With findings supporting the Pollution Haven Hypothesis, policymakers must pay attention to FDI inflows, ensuring that FDI place high importance on the transfer of green technologies to improve the efficiency. These goals could be achieved through an increase in the stringency of environmental laws within the host countries, especially the ones related to FDI.

Suggested Citation

  • Marques, António Cardoso & Caetano, Rafaela Vital, 2022. "Do greater amounts of FDI cause higher pollution levels? Evidence from OECD countries," Journal of Policy Modeling, Elsevier, vol. 44(1), pages 147-162.
    • Handle: RePEc:eee:jpolmo:v:44:y:2022:i:1:p:147-162
    DOI: 10.1016/j.jpolmod.2021.10.004
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    Cited by:

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    2. Syed Jaffar Abbas & Muhammad Munawar Hussain & Muhammad Salman & Sara Shahid & Asim Iqbal, 2022. "Economic Growth, Energy Consumption and Environment Relationship: A Panel Data Analysis of South Asian Countries," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 8(4), pages 143-151, December.
    3. Yusen Luo & Zhengnan Lu & Chao Wu & Claudia Nyarko Mensah, 2023. "Environmental Regulation Effect on Green Total Factor Productivity: Mediating Role of Foreign Direct Investment Quantity and Quality," IJERPH, MDPI, vol. 20(4), pages 1-18, February.
    4. Opoku, Eric Evans Osei & Acheampong, Alex O. & Aluko, Olufemi Adewale, 2024. "Impact of rural-urban energy equality on environmental sustainability and the role of governance," Journal of Policy Modeling, Elsevier, vol. 46(2), pages 304-335.

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    More about this item

    Keywords

    Foreign direct investment; Carbon dioxide emissions; Pollution; Autoregressive distributed lag; Pollution Haven Hypothesis;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F18 - International Economics - - Trade - - - Trade and Environment
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • L7 - Industrial Organization - - Industry Studies: Primary Products and Construction
    • L8 - Industrial Organization - - Industry Studies: Services

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