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The Impact of FDI on CO 2 Emissions in Latin America

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  • Luisa Blanco
  • Fidel Gonzalez
  • Isabel Ruiz

Abstract

This paper uses panel Granger causality tests to study the relationship between sector-specific foreign direct investment (FDI) and CO 2 emissions. Using a sample of 18 Latin American countries for the period 1980--2007, we find causality running from FDI in pollution-intensive industries (“the dirty sector”) to CO 2 emissions per capita. This result is robust to controlling for other factors associated with CO 2 emissions and using the ratio of CO 2 emissions to GDP. For other sectors, we find no robust evidence that FDI causes CO 2 emissions.

Suggested Citation

  • Luisa Blanco & Fidel Gonzalez & Isabel Ruiz, 2013. "The Impact of FDI on CO 2 Emissions in Latin America," Oxford Development Studies, Taylor & Francis Journals, vol. 41(1), pages 104-121, March.
    • Handle: RePEc:taf:oxdevs:v:41:y:2013:i:1:p:104-121
    DOI: 10.1080/13600818.2012.732055
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    1. Javorcik Beata Smarzynska & Wei Shang-Jin, 2003. "Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-34, December.
    2. Grossman, G.M & Krueger, A.B., 1991. "Environmental Impacts of a North American Free Trade Agreement," Papers 158, Princeton, Woodrow Wilson School - Public and International Affairs.
    3. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, September.
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