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The Difference in the FDI - CO2 Emissions Relationship between Developed and Developing Countries: Empirical Evidence Based on Institutional Perspective

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  • Nguyen, Van Bon

Abstract

The role of FDI relating to the problems of environmental pollution in host countries has been recognized by related literature. Some papers posit the pollution haven hypothesis while others advocate the pollution halo hypothesis. The paper provides empirical evidence to demonstrate that the relationship between FDI and environment quality varies based on the governance environment of host countries. The findings support the pollution halo hypothesis in 31 developed countries with a good governance environment and the pollution haven hypothesis in 55 developing countries with a bad one using the two-step system GMM estimator from 2005 to 2018. Besides, the results indicate that the difference in the impact of economic growth on environmental quality between developed and developing countries approves the hypothesis of the environmental Kuznets curve. The robustness of these estimates is checked by the PMG estimator. These findings suggest some policy implications for developing countries in improving environmental quality.

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  • Nguyen, Van Bon, 2021. "The Difference in the FDI - CO2 Emissions Relationship between Developed and Developing Countries: Empirical Evidence Based on Institutional Perspective," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 62(2), pages 124-140, December.
    • Handle: RePEc:hit:hitjec:v:62:y:2021:i:2:p:124-140
    DOI: 10.15057/hje.2021006
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    More about this item

    Keywords

    FDI; environmental pollution; developed countries; developing countries; environmental Kuznets curve; GMM estimator; PMG estimator;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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