Foreign direct investment, income, and environmental pollution in developing countries: Panel data analysis of Latin America

Effects of foreign direct investment (FDI) and income on pollution emissions are examined using time series data from 1980 to 2010 for 14 Latin American countries. Specifically, we test the validity of Pollution Haven Hypothesis (PHH) and Environmental Kuznets Curve (EKC) hypothesis for this region....

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Bibliographic Details
Published in:Energy economics 2017-05, Vol.64, p.206-212
Main Authors: Sapkota, Pratikshya, Bastola, Umesh
Format: Article
Language:English
Subjects:
Air pollution
Clean energy
Data analysis
Data processing
Developing countries
Economic conditions
Economic development
Economic growth
Emissions
Emissions control
Employment
Endogeneity
Energy
Energy economics
Energy efficiency
Energy policy
Environmental health
Environmental impact
Environmental Kuznets curve
Environmental Kuznets curve hypothesis
Fixed and random effects
Foreign investment
Health care policy
Human capital
Hypotheses
Income
Investment
Kuznets curve
Latin America
LDCs
Longitudinal studies
Low income groups
Panel data
Pollution
Pollution effects
Pollution haven hypothesis
Population density
Public health
Random effects
Time series
Unemployment
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Summary:Effects of foreign direct investment (FDI) and income on pollution emissions are examined using time series data from 1980 to 2010 for 14 Latin American countries. Specifically, we test the validity of Pollution Haven Hypothesis (PHH) and Environmental Kuznets Curve (EKC) hypothesis for this region. Results from panel fixed and random effects models that controlled the effects of physical capital, energy, human capital, population density, and unemployment rate indicate the validity of both the PHH and EKC hypothesis. Estimating two separate models for high and low-income countries does not alter the findings for the PHH, however, the impacts of human capital on pollution emission are found to be different for the two groups of countries. Policies that focus on attracting clean and energy efficient industries through FDI have potential to improve environmental health while enhancing economic growth in Latin America. •The Pollution Haven and EKC hypotheses are tested for Latin America.•Effects of physical and human capital, energy, and unemployment rate are controlled.•Results indicate the validity of both the PHH and EKC hypotheses.•Impact of human capital on pollution differs by per capita income.•Policies attracting clean and energy efficient industries through FDI seem useful.
ISSN:0140-9883
1873-6181
DOI:10.1016/j.eneco.2017.04.001