Environmental Consequences of Economic Growth and Foreign Direct Investment: Evidence from Developing Countries

This paper investigated the environmental consequences of economic growth and foreign direct investment in developing countries during 1990-2010, using panel co-integration test and FMOLS method. The CO2 emission is used as a proxy of environment quality. The results confirmed Environmental Kuznets Curve in developing countries. In other words, there is a reverse-u shape relationship between economic growth and environment quality. Moreover, the results of non-linear model show that the foreign direct investment inflows led to increase CO2 emissions, monotonically. Hence, there is not any reverse-u shape relationship between foreign direct investment and CO2 emissions. In other words, the pollution haven hypothesis is confirmed.