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Does Foreign Direct Investment Harm the Environment in Developing Countries? Dynamic Panel Analysis of Latin American Countries

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  • Jungho Baek

    (Department of Economics, University of Alaska, Fairbanks, AK 99775-6080, USA)

  • Yoon Jung Choi

    (Global Strategy Research Center, Korea Trade-Investment Promotion Agency, Seoul 06792, Korea)

Abstract

This article sets out to study the FDI–environment nexus within a dynamic panel data framework. To that end, the pooled mean group (PMG) method of Pesaran et al. (1999) is used to assess the impact of FDI on CO 2 emissions, controlling for income and energy consumption, using a panel of 17 Latin American countries. Our results using the full sample show that FDI increases CO 2 emissions, confirming the pollution haven hypothesis. But when splitting the data into different income groups, FDI inflows only in high-income countries increase CO 2 emissions. In addition, CO 2 emissions with growth tend to increase monotonically within the full sample and middle-income countries. Finally, energy consumption is found to increase CO 2 emissions in all cases: the full sample, high-, middle- and low-income countries.

Suggested Citation

  • Jungho Baek & Yoon Jung Choi, 2017. "Does Foreign Direct Investment Harm the Environment in Developing Countries? Dynamic Panel Analysis of Latin American Countries," Economies, MDPI, vol. 5(4), pages 1-8, October.
    • Handle: RePEc:gam:jecomi:v:5:y:2017:i:4:p:39-:d:116002
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    References listed on IDEAS

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