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Foreign Direct Investment And Air Pollution In China: Evidence From Chinese Cities

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  • Jie HE

    (Universite de Sherbrooke)

Abstract

In order to gain deeper insight into the impacts of FDI on the air pollution situation in Chinese cities, I construct a simultaneous system. This system supposes the air pollution indicators to be determined by economic scale, industrial composition and technical characters of a city and in turn, FDI entry can affect the production scale, structure transformation and technical progress in pollution abatement activities. This system is tested for two air pollution cases in China: the annual average concentration of SO2 and total suspended particles (TSP). Based on a panel database of 80 cities (1993-2001), the system is estimated by the Generalized Method of Moment (GMM) estimator for simultaneous system. The fixed effect estimator and the method of Anderson and Hsiao (1982) are included to take into account the city’s specific effect and the potential first-order autocorrelation respectively. The results show that although there exist various channels through which FDI affects pollution, the impacts of FDI on pollution are mainly exerted through scale and technical effects. Corresponding to similar studies, the total environmental impacts of FDI in both pollution cases are proven to be very small.

Suggested Citation

  • Jie HE, 2008. "Foreign Direct Investment And Air Pollution In China: Evidence From Chinese Cities," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 28, pages 131-150.
    • Handle: RePEc:tou:journl:v:28:y:2008:p:131-150
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    References listed on IDEAS

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    1. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
    2. He, Jie, 2006. "Pollution haven hypothesis and environmental impacts of foreign direct investment: The case of industrial emission of sulfur dioxide (SO2) in Chinese provinces," Ecological Economics, Elsevier, vol. 60(1), pages 228-245, November.
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    7. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
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    Cited by:

    1. Pasquale Pazienza, 2015. "The Environmental Impact of the FDI Inflow in the Transport Sector of OECD Countries and Policy Implications," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 21(1), pages 105-116, March.
    2. Marques, António Cardoso & Caetano, Rafaela, 2020. "The impact of foreign direct investment on emission reduction targets: Evidence from high- and middle-income countries," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 107-118.
    3. Yang, Boqiong & Chen, Jianguo, 2011. "An empirical model of the environmental effect of FDI in host countries: Analysis based on Chinese panel data," IAMO Forum 2011: Will the "BRICs Decade" Continue? – Prospects for Trade and Growth 3, Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO).
    4. Hille, Erik & Shahbaz, Muhammad & Moosa, Imad, 2019. "The impact of FDI on regional air pollution in the Republic of Korea: A way ahead to achieve the green growth strategy?," Energy Economics, Elsevier, vol. 81(C), pages 308-326.
    5. Ojewumi, Sunday Johnson & Akinlo, Anthony Enisan, 2017. "Foreign Direct Investment, Economic Growth and Environmental Quality in SubSaharan Africa: A Dynamic Model Analysis," African Journal of Economic Review, African Journal of Economic Review, vol. 5(1), January.
    6. Gallaway, Terrel & Olsen, Reed N. & Mitchell, David M., 2010. "The economics of global light pollution," Ecological Economics, Elsevier, vol. 69(3), pages 658-665, January.
    7. Hille, Erik, 2016. "The impact of foreign direct investments on regional air pollution in the Republic of Korea: A way ahead to achieve the green growth strategy?," VfS Annual Conference 2016 (Augsburg): Demographic Change 145517, Verein für Socialpolitik / German Economic Association.
    8. Imad Moosa, 2019. "The Environmental Effects of FDI: Evidence from MENA Countries," Working Papers 1321, Economic Research Forum, revised 21 Aug 2019.
    9. Boqiong Yang & Stephan Brosig & Jianguo Chen, 2013. "Environmental Impact of Foreign vs. Domestic Capital Investment in China," Journal of Agricultural Economics, Wiley Blackwell, vol. 64(1), pages 245-271, February.
    10. Pasquale Pazienza & Caterina Lucia, 2020. "How does FDI in the “agricultural and fishing” sector affect methane emission? Evidence from the OECD countries," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(2), pages 441-462, July.
    11. Qichang Xie & Yingkun Yan & Xu Wang, 2023. "Assessing the role of foreign direct investment in environmental sustainability: a spatial semiparametric panel approach," Economic Change and Restructuring, Springer, vol. 56(2), pages 1263-1295, April.

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    More about this item

    Keywords

    CHINA; FDI; SO2 CONCENTRATION; TSP CONCENTRATION; CITIES; SIMULTANEOUS SYSTEM; SCALE; COMPOSITION AND TECHNICAL EFFECT;
    All these keywords.

    JEL classification:

    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • 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
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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