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

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.

Hitotsubashi University

2021-12

English(eng)

departmental bulletin paper

VoR

10.15057/hje.2021006

2436-097X

AA12909202

Hitotsubashi Journal of Economics

62

2

124

140

Vol. 62, no. 2(Dec. 2021)

https://hdl.handle.net/10086/72507