Economic Growth and Environmental Sustainability in Developing Economies

Abstract

This study examines the impact of economic growth and foreign direct investment (FDI) on environmental degradation in 76 developing economies between 1991 and 2022, using various panel data models. Firstly, the environmental Kuznets curve hypothesis is supported, indicating that, as the economy expands, cleaner technologies and practices are adopted, resulting in lower carbon emissions. Secondly, FDI and carbon emissions are positively related, suggesting that investment type and regulatory frameworks must be considered carefully. This analysis underlines the impact of abundant natural resources on emissions and stresses the significance of diversification strategies and the transition to cleaner technologies. Thirdly, further analysis involving interaction effects indicates that environmental degradation increases when high economic growth, abundant resources, and substantial FDI occur simultaneously. These findings highlight the importance of devising context-specific strategies and policies to balance economic growth and environmental sustainability in developing economies.