Abstract
This study aims to unravel the environmental effects of institutional quality in relationship with China’s Foreign Direct Investment (FDI) in Belt and Road Initiative (BRI) countries. The empirical analysis is conducted over the period 2003–2018, using the System-GMM approach with the Windmeijer finite-sample correction. We infer that China’s FDI has a detrimental effect on environmental quality, which validates the ‘pollution haven hypothesis’ in the BRI region. Importantly, the interaction effect of China’s FDI with indicators of institutional quality yields negative and significant results. This entails that strong institutions can boost the quality of the environment through FDI attractiveness. In further assessment, the threshold levels of institutional quality are calculated, beyond which China’s FDI can reduce carbon emissions in the BRI region. This substantiates both the pollution haven and pollution halo hypotheses. The study underscores the importance of institutional reform in the quest for sustainable development, owing to the fact that most economies prioritize FDI-led growth strategies.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
