The Impact of Foreign Direct Investments and Economic Growth on Environmental Degradation: The Case of the Balkans

Aleksandra Pavlović,Mladen Radišić,Aleksandar Takači,Alpar Lošonc,Sebastian Kot,Andrea Ivanišević,Milica Njegovan

doi:10.3390/en14030566

Abstract

The aspiration of this study was to examine the impact of foreign direct investments (FDI) and economic growth on environmental degradation in the Balkans for the period 1998–2019. Balkan countries were classified into two groups, high income countries (HIC) and upper-middle income countries (UMIC). Thus, two hypotheses have been set. The effect of FDI on environmental degradation was observed through pollution haven hypothesis (PHH). To examine that connection, we used Pearson correlation for all countries, HIC and UMIC. Furthermore, the impact of economic growth on environmental degradation was tested through the environmental Kuznets curve (EKC) hypothesis. For that purpose, polynomial linear regression was applied. In order to examine the dependence of environmental degradation in relation to all predictors in the model, a multivariate linear regression was used. PHH was confirmed in Serbia, Albania, Croatia, Romania, and Bulgaria, the Balkans as a whole, and HIC, and the EKC hypothesis was rejected. This paper represents a contribution to a very scarce number of studies regarding the impact of FDI and economic growth on the environment in the Balkans, as a whole. The results of this study can be useful to policy makers in the terms of inducting stricter environmental rules.

Highlights

The tendencies of many countries towards economic progress, which involves attracting foreign direct investments (FDI), are often in conflict with increasingly demanding requirements for pollution control at both local and global levels
The goal of this paper is to study the impact of FDI and gross domestic product (GDP) on CO2 emissions, which has been quite neglected in the world and especially in such a closely related group of countries in the Balkans
The standard environmental Kuznets curve (EKC) model was extended with variables that are considered to have a significant impact on CO2 emissions in addition to GDP, namely

Summary

Introduction

The tendencies of many countries towards economic progress, which involves attracting foreign direct investments (FDI), are often in conflict with increasingly demanding requirements for pollution control at both local and global levels. Achieving the balance between these tendencies has become an area of growing concern to ecological economists and it has been intensified in the countries that do not traditionally export their capital, that is, countries that do not accumulate enough financial capital for domestic investments. There is a large number of researches that have dealt with the issue of FDI and their impact on economic growth. Most studies have shown a positive and significant link between FDI and economic growth [1,2,3,4,5]. The question of importance for this paper is whether both mentioned economic parameters have an impact on the CO2

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Discussion

Conclusion