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The Environmental Cost of Attracting FDI: An Empirical Investigation in Brazil

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  • Eduardo Polloni-Silva

    (Department of Production Engineering (DEP), Federal University of São Carlos (UFSCar), São Carlos 13565-905, Brazil)

  • Guilherme Augusto Roiz

    (Department of Production Engineering, Escola de Engenharia de São Carlos (EESC), University of São Paulo (USP), São Carlos 05508-270, Brazil)

  • Enzo Barberio Mariano

    (Department of Production Engineering, School of Engineering of Bauru, Campus Bauru, São Paulo State University (UNESP), Bauru 14800-903, Brazil)

  • Herick Fernando Moralles

    (Department of Production Engineering (DEP), Federal University of São Carlos (UFSCar), São Carlos 13565-905, Brazil)

  • Daisy Aparecida Nascimento Rebelatto

    (Department of Production Engineering, Escola de Engenharia de São Carlos (EESC), University of São Paulo (USP), São Carlos 05508-270, Brazil)

Abstract

Many emerging economies seek to increase their Foreign Direct Investment (FDI) inflows to achieve some promised benefits, such as economic growth and advanced technologies. Nevertheless, FDI does not represent a random investment decision, and international literature demonstrates that foreign investors are mostly interested in fast-growing regions. Therefore, this study uses traditional panel data econometrics coupled with Data Envelopment Analysis (DEA) to investigate the environmental impact in regions with great potential to attract foreign investments (e.g., more advanced regions with growing infrastructure), therefore analyzing the environmental cost of attracting FDI. Additionally, this study employs regional data from the ‘Atlas of FDI in the State of São Paulo’ to investigate the environmental effects of FDI in the periphery, where attractiveness levels are low. The results indicate that regions with higher attractiveness levels prepare a pollutant development strategy and that FDI in less-developed regions is harmful to the environment. The results point to new perspectives on the FDI–environment debate and suggest that attracting FDI is environmentally costly. Also, FDI is heterogeneous, with its presence in peripheral areas being harmful to the environment. To conclude, we discuss these results and present an agenda for future research.

Suggested Citation

  • Eduardo Polloni-Silva & Guilherme Augusto Roiz & Enzo Barberio Mariano & Herick Fernando Moralles & Daisy Aparecida Nascimento Rebelatto, 2022. "The Environmental Cost of Attracting FDI: An Empirical Investigation in Brazil," Sustainability, MDPI, vol. 14(8), pages 1-14, April.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:8:p:4490-:d:790462
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    Cited by:

    1. Vanessa da Silva Mariotto Onody & Ana Catarina Gandra de Carvalho & Eduardo Polloni-Silva & Guilherme Augusto Roiz & Enzo Barberio Mariano & Daisy Aparecida Nascimento Rebelatto & Herick Fernando Mora, 2022. "Corruption and FDI in Brazil: Contesting the “Sand” or “Grease” Hypotheses," Sustainability, MDPI, vol. 14(10), pages 1-18, May.
    2. Aristide Karangwa & Zhan Su, 2023. "Towards a Multidimensional Model for Evaluating the Sustainable Effect of FDI on the Development of Host Developing Countries: Evidence from Africa," Sustainability, MDPI, vol. 15(5), pages 1-23, March.
    3. Phi-Hung Nguyen & Thi-Ly Nguyen & Hong-Quan Le & Thuy-Quynh Pham & Hoang-Anh Nguyen & Chi-Vinh Pham, 2023. "How Does the Competitiveness Index Promote Foreign Direct Investment at the Provincial Level in Vietnam? An Integrated Grey Delphi–DEA Model Approach," Mathematics, MDPI, vol. 11(6), pages 1-30, March.
    4. Xiaodi Yang & Di Wang, 2022. "Heterogeneous Environmental Regulation, Foreign Direct Investment, and Regional Carbon Dioxide Emissions: Evidence from China," Sustainability, MDPI, vol. 14(11), pages 1-19, May.

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