Abstract
This study is conducted to examine the concerns of the foreign direct investment (FDI) causing environment degradation and also to test the validity of the traditional Environmental Kuznets Curve (EKC) in the context of emerging markets in the Asian region. Data of these countries from 1980–2016 are utilised. This study employs panel cointegration Fully Modified Ordinary Least Squares (FMOLS), which treats the endogeneity problem, and its estimators are adjusted for serial correlation. Moreover, this study also uses panel Dynamic Ordinary Least Squares (DOLS), which includes contemporaneous value, leads and, lags of the first difference of the regressors to correct endogeneity problems and serial correlations. Findings from this study indicate that the pollution heaven hypothesis and the EKC curve are generally valid in the region. In addition, FDI has a strong impact on the environment.
Highlights
For recent decades, emerging markets in Asia have achieved significant economic growth.Their economic growth depends heavily on capital
This study uses Dynamic Ordinary Least Squares (DOLS) estimators as a confirmation in terms of direction and magnitude of a coefficient obtained by Fully Modified Ordinary Least Squares (FMOLS)
The results obtained from the FMOLS and DOLS reveal that all variables, which in the model include variables such as oil consumption (Oil), foreign direct investment (FDI), GDP, and their square and cubic versions, strongly effect carbon emissions
Summary
For recent decades, emerging markets in Asia have achieved significant economic growth. Their economic growth depends heavily on capital. The nations have attracted foreign direct investment (FDI), which has a positive impact on economic growth in host countries. FDI leads to environmental degradation for the host countries. Host countries considered the trade-off between environmental degradation and growth so that they are able to attract FDI to their countries. Many incidents have occurred in relation to significant environmental damages for the host countries, such as the case of Formosa Chemicals Corporation in Vietnam in 2016—a significant degradation led to at least 115 tons of dead fish; 450 hectares of coral reefs were significantly destroyed and more than 350 hectares of shrimp farming were killed, affecting the living conditions and income of more than
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