Davidson, N. B., Mariev, O. S., & Baev, D. V. (2019). The Impact of Foreign Direct Investment of Environment: An Econometric Analysis. Zhurnal Economicheskoj Teorii [Russian Journal of Economic Theory], 16(3), 575-580
While foreign direct investment (FDI) plays an important role in economic development of countries, foreign firms tend to negatively affect the host economies’ environment. The aim of our research is to analyze the determinants of FDI impact on environment. We study the effects of FDI on CO2 emissions. Based on country level panel data for 1996–2013, we estimate an econometric model with CO2 emissions defined as a dependent variable, affected by FDI inflows, GDP per capita, corruption control level and population. The model is estimated using GMM. Results show that when FDI inflows increase, the level of CO2 emissions also increases. This effect is stronger in transitioning and developing countries than in developed countries. Besides, for the developing countries the environmental Kuznets curve hypothesis is confirmed: with GDP growth CO2 emissions also grow until GDP reaches a certain level, and with further GDP growth CO2 emissions start decreasing. The results are useful for development and analysis of economic policy measures in Russia and other countries.