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Does foreign direct investment impede environmental quality in Asian countries? A panel data analysis
Author(s) -
Ansari Mohd Arshad,
Khan Nisar Ahmed,
Ganaie Aadil Ahmad
Publication year - 2019
Publication title -
opec energy review
Language(s) - English
Resource type - Journals
eISSN - 1753-0237
pISSN - 1753-0229
DOI - 10.1111/opec.12144
Subject(s) - cointegration , pollution haven hypothesis , unit root , foreign direct investment , panel data , china , east asia , environmental degradation , openness to experience , unit root test , geography , environmental pollution , development economics , economics , economy , environmental protection , macroeconomics , econometrics , psychology , ecology , social psychology , archaeology , biology
This study aims to investigate the validity of the pollution haven hypothesis for the global panel consisting of 29 countries (Bahrain, Israel, Jordan, Saudi Arabia, Turkey, United Arab Emirates, Oman, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan, China, Japan, Mongolia, Hong Kong, Korea rep, Bangladesh, India, Pakistan, Sri Lanka, Nepal, IR Iran, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam are taken as the sample of this study) with energy consumption, economic growth and trade openness as additional determinants of environmental degradation over the period 1994–2014. To make the panel data analysis more homogenous, we also investigate the validity of the PHH for a number of sub‐panels. These sub‐panels are constructed based on the sub‐regions of Asia. In this way, we end up with six Asian panels; namely, Global panel, West Asia, Central Asia, East Asia, South Asia and Southeast Asian panels. Based on the IPS and ADF chi‐square unit root test and Pedroni cointegration test results, all variables were found to be first difference stationary and cointegrated. On applying FMOLS , the long‐run results suggest the presence of the pollution haven hypothesis only in East Asian panel. In turn, foreign direct investment reduces environmental degradation, thus rejecting the validity of the pollution haven hypothesis ( PHH ) in the Southeast Asian panel which is found to be negatively linked to CO 2 emissions. Moreover, energy consumption seems to be the main determinant of carbon emissions and GDP growth has a positive impact on it in all panels except West Asia. Lastly, East Asian countries have followed the Kyoto protocol in order to reduce their emissions level.