Spatial econometric analysis of foreign direct investment and carbon productivity in China: Two-tier moderating roles of industrialization development

Abstract

The increasing of carbon productivity is crucial to the success of China’s green development goals. Among them, Foreign Direct Investment (FDI) is seen as a potential pillar of achieving these strategic goals. Based on 1998–2016 provincial-level panel data in China, this paper combines influencing mechanisms such as the scale effect, structural effect, technical effect and environmental effect, and constructed a spatial simultaneous equations model of carbon productivity. This study calculated the comprehensive impact of FDI on carbon productivity by using the generalized space three-stage least-squares estimator method (GS3SLS), and further explored the moderating effect of the regional industrialization level by adding interaction items, in order to discuss the turning point of the local government's investment policy. The results showed that: (1) Local FDI has a positive impact on local carbon productivity, but FDI in surrounding areas (SFDI) has a negative impact on local carbon productivity, structural effect is the main reason for the difference; (2) The moderating effect of industrial development does exist. By calculating the threshold of FDI and SFDI, this paper classifies China's industrialization development level into three levels. When formulating and implementing relevant policies to attract investment, the Chinese government should not simply implement the policy on the basis of geographical regions, but should fully coordinate heterogeneity between the introduction of FDI and industrialization development, so as to significantly improve China’s carbon productivity.