Abstract
PurposeThis paper aims to clarify the relationship between foreign direct investment (FDI) and carbon intensity. This study uses the dynamic panel data model to study and provide fresh evidence for the issue.Design/methodology/approachThis study first uses the dynamic panel data model to consider the endogeneity problem, and applies a system-generalized method of moments estimator to study the effect of FDI on carbon intensity using the panel data of 188 countries during 1990-2013.FindingsThe result shows that FDI has a significant negative impact on carbon intensity of the host country. After considering the other factors, including share of fossil fuels, industrial intensity, urbanization level and trade openness, the impact of FDI on carbon intensity is still significantly positive. In addition, FDI also has a significant negative impact on carbon intensity of high-income countries and middle- and low-income countries.Originality/valueThis paper offers two contributions to the literature on the effect of FDI on carbon intensity. From a methodological perspective, this paper is the first to apply a dynamic panel data model to study the effect of FDI on carbon intensity using worldwide panel data. Second, this paper is the first to analyze the effect of FDI on carbon intensity in different countries with different income levels separately.
Highlights
During the mid-twentieth century, with the development of economic globalization, multinational companies actively participated in international production and operation, which encouraged the moving of resources globally
The results show that the coefficient of foreign direct investment (FDI) is significantly negative, indicating that FDI will reduce carbon intensity of the host country, which supports the halo effect hypothesis
Research conclusions and policy recommendations This paper first analyzes the effect of FDI on carbon intensity by using the data of 188 countries during 1990-2013
Summary
During the mid-twentieth century, with the development of economic globalization, multinational companies actively participated in international production and operation, which encouraged the moving of resources globally. Multinational companies promote resource optimization worldwide, affect the utilization of natural resources in the host country and influence their emission of pollutants. The change in the layout of multinational companies might result in a redistribution of carbon emissions in different countries, as it might promote the global spread of capital and technology and. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
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