Abstract
This paper investigates the impact of foreign direct investment (FDI) and corruption on the environmental pollution in Tunisia over the period 1984–2014 by applying an autoregressive distributed lag model. Our results revealed the existence of Environmental Kuznets Curve in Tunisian case. The pollution haven hypothesis postulates that polluting industrial activity in developed countries is shifting to developing countries with less stringent environmental regulations. This hypothesis has been proved. Hence, this study advises to make more aware to the negative effect of corruption. Overall, to improve environmental quality, the findings suggest that Tunisia should promote energy efficiency with sustainable growth. Therefore, results show that Tunisia should encourage more FDI inflows particularly in technology- intensive and environment-friendly industries.
Highlights
From the 2000s, Tunisia changed its investment regime; this regime becomes increasingly open to opening up its multinationals borders
If foreign direct investment (FDI) flows are combined with other factors, they may play a positive role in growth
The results show that FDI increases CO2 emissions for countries with low incomes
Summary
From the 2000s, Tunisia changed its investment regime; this regime becomes increasingly open to opening up its multinationals borders. A new factor emerges as a determinant of the location of companies abroad: the quality of environment (Erdal et al [2008], Frankel and Rose [2005] Haisheng et al [2005] and Managi [2004]) This determinant was evoked Al-Mulali and Tang (2013), Pao and Tsai (2011), Dong et al (2010), stating that developed countries, are concerned about protecting their environment and would abandon polluting activities for the benefit of developing countries. In these countries environmental regulations are lax. They show that a lax environmental policy determines the attractiveness of a Chinese province
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