Foreign direct investment and pollution havens: evidence from African countries
DOI:
https://doi.org/10.14738/abr.712.7531Keywords:
Foreign direct investment, CO2 emissions, Pollution haven hypothesis, Panel cointegration analysisAbstract
This study examines the relationship between foreign direct investment (FDI) inflows and carbon dioxide emissions (CE) in order to investigate the validity of the pollution haven hypothesis for 54 African countries, using cointegration approach with dynamic panel data over the period 1960-2018. Based on the panel cointegration analysis, it was concluded that the variables are cointegrated. Moreover, the Dynamic Ordinary Least Square (DOLS) and Fully Modified Ordinary Least Square (FMOLS) results showed that foreign direct investment inflows have a long-run positive relationship with carbon dioxide emissions. Furthermore, according to Granger-Engle causality test results, FDI inflows and carbon dioxide emissions have a positive causal relationship, for both short-run and long-run. Thus, the results of this study validate the pollution haven hypothesis in the African countries. Nevertheless, it is recommended to keep attracting foreign direct investment inflows alongside of implementing mechanisms and instruments for reducing the CO2 emissions under strong environmental policies.
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Ben Kheder, Sonia, and Natalia Zugravu-Soilita. 2008. “The Pollution Haven Hypothesis: A Geographic Economy Model in a Comparative Study.” SSRN Scholarly Paper ID 1266705. Rochester, NY: Social Science Research Network. https://papers.ssrn.com/abstract=1266705.
Copeland, Brian R., and M. Scott Taylor. 1994. “North-South Trade and the Environment.” The Quarterly Journal of Economics 109 (3): 755–87. https://doi.org/10.2307/2118421.
“EY’s Attractiveness Program Africa 2019.” n.d. Accessed November 14, 2019. https://www.ey.com/za/en/issues/business-environment/ey-attractiveness-program-africa-2019.
Fadhil, Mohammed Ameen, and Mahmoud Khalid Almsafir. 2015. “The Role of FDI Inflows in Economic Growth in Malaysia (Time Series: 1975-2010).” Procedia Economics and Finance, 2nd GLOBAL CONFERENCE on BUSINESS, ECONOMICS, MANAGEMENT and TOURISM, 23 (January): 1558–66. https://doi.org/10.1016/S2212-5671(15)00498-0.
Javorcik, Beata Smarzynska, and Shang-Jin Wei. 2003. “Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?” Contributions in Economic Analysis & Policy 3 (2). https://doi.org/10.2202/1538-0645.1244.
Jbara ’07, Brian W. 2007. “Exploring the Causality between the Pollution Haven Hypothesis and the Environmental Kuznets Curve.” Honors Projects, January. https://digitalcommons.iwu.edu/econ_honproj/21.
Kirkpatrick, Colin, and Kenichi Shimamoto. 2008. “The Effect of Environmental Regulation on the Locational Choice of Japanese Foreign Direct Investment.” Applied Economics 40 (11): 1399–1409. https://doi.org/10.1080/00036840600794330.
MacDermott, Raymond. 2009. “A Panel Study of the Pollution-Haven Hypothesis.” Global Economy Journal 9 (1): 1850154. https://doi.org/10.2202/1524-5861.1372.
Melnyk, Leonid, Oleksandr Kubatko, and Sergiy Pysarenko. 2014. “The Impact of Foreign Direct Investment on Economic Growth: Case of Post Communism Transition Economies.” Problems and Perspectives in Management 12 (January): 17–24.
Mutafoglu, Takvor H. 2012. “Foreign Direct Investment, Pollution, and Economic Growth: Evidence from Turkey.” Journal of Developing Societies 28 (3): 281–97. https://doi.org/10.1177/0169796X12453780.
Omar, Wan Ahmad Wan, Fauzi Hussin, and Asan Ali G. H. 2015. “The Empirical Effects of Islam on Economic Development in Malaysia.” Research in World Economy 6 (1): 99–111.
Porter, Michael E., and Claas van der Linde. 1995. “Toward a New Conception of the Environment-Competitiveness Relationship.” The Journal of Economic Perspectives 9 (4): 97–118.
Sapkota, Pratikshya, and Umesh Bastola. 2017. “Foreign Direct Investment, Income, and Environmental Pollution in Developing Countries: Panel Data Analysis of Latin America.” Energy Economics 64 (May): 206–12. https://doi.org/10.1016/j.eneco.2017.04.001.
Sarkodie, Samuel Asumadu, and Vladimir Strezov. 2019. “Effect of Foreign Direct Investments, Economic Development and Energy Consumption on Greenhouse Gas Emissions in Developing Countries.” Science of The Total Environment 646 (January): 862–71. https://doi.org/10.1016/j.scitotenv.2018.07.365.
Sharif, Suhail. 2014. “Foreign Direct Investment and Unemployment Reduction in Pakistan.” IJER 5 (January).
Sokang, Khun. 2018. “The Impact of Foreign Direct Investment on the Economic Growth in Cambodia: Empirical Evidence.” International Journal of Innovation and Economic Development 4 (5): 31–38. https://doi.org/10.18775/ijied.1849-7551-7020.2015.45.2003.
Solarin, Sakiru Adebola, Usama Al-Mulali, Ibrahim Musah, and Ilhan Ozturk. 2017. “Investigating the Pollution Haven Hypothesis in Ghana: An Empirical Investigation.” Energy 124 (April): 706–19. https://doi.org/10.1016/j.energy.2017.02.089.
“UNCTAD | World Investment Report: Annex Tables.” n.d. Accessed November 13, 2019. https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Annex-Tables.aspx.
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Published
2020-01-03
How to Cite
GHARNIT, S., Bouzahzah, M., & Ait Soussane, J. (2020). Foreign direct investment and pollution havens: evidence from African countries. Archives of Business Research, 7(12), 244–252. https://doi.org/10.14738/abr.712.7531
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