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Reexamining the impact of foreign direct investment on carbon emissions: does per capita GDP matter?

Economics

Reexamining the impact of foreign direct investment on carbon emissions: does per capita GDP matter?

Q. Wang, T. Yang, et al.

Research by Qiang Wang, Ting Yang, Rongrong Li, and Xiaowei Wang explores the intriguing shift in foreign direct investment’s (FDI) impact on carbon emissions across varying income levels. The findings reveal that FDI can paradoxically increase emissions below a GDP per capita of $541.87 but becomes a force for good, reducing emissions at levels above $46,515. Discover how raising income levels can unlock FDI's potential to improve environmental quality!

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Playback language: English
Abstract
Existing research on the impact of foreign direct investment (FDI) on environmental quality lacks consensus. This paper investigates a potential structural break in the FDI-environment relationship based on economic scale. Using panel threshold estimation for 67 countries across different income groups, with GDP as the threshold, the results show a shift in FDI's impact on carbon emissions from positive to negative at varying income levels. This is confirmed by robust tests. Below a GDP per capita of $541.87, FDI positively impacts carbon emissions; above $46515, the impact turns significantly negative. The paper advocates for raising income levels to leverage FDI's emission-reducing potential.
Publisher
Humanities & Social Sciences Communications
Published On
Jul 12, 2023
Authors
Qiang Wang, Ting Yang, Rongrong Li, Xiaowei Wang
Tags
foreign direct investment
carbon emissions
economic scale
income levels
structural break
threshold estimation

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