Does foreign direct investments impair the ecological footprint? New evidence from the panel quantile regression.

Abstract

This study examines the impact of foreign direct investments on ecological footprint along with other explanatory variables of 92 countries from the year 2001 to 2016. Here, we applied the panel quantile regression model to meet the purpose of our study as it considers unobserved country heterogeneity, unlike other statistical methods. The study reveals that foreign direct investment has a positive relationship with the ecological footprint in each quantile except one, which proves the constancy of the pollution haven hypothesis. Moreover, we also tried to detect the impact of economic growth, manufacturing value-added, the percentage of world exports, and institutional quality on the ecological footprint in this study. The findings of this study also reveal that economic growth and manufacturing value-added are negatively associated with the ecological footprint. With respect to the percentage of world exports and institutional quality, we found a positive relationship with the ecological footprint. From the result of our study, different policy implications have been proposed for host countries and foreign investors on improving the economy through foreign direct investment with minimal ecological footprint.