The role of physical and human capital in FDI-pollution-growth nexus in countries with different income groups: A simultaneity modeling analysis |
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| Institution: | 1. West Center for Economic Research, Southwestern University of Finance and Economics, Chengdu 611130, China;2. Sichuan Normal University, Chengdu 610066, China;3. Department of Economics, Karakoram International University Gilgit, Pakistan;1. School of Management Science and Real Estate, Chongqing University, Chongqing, China;2. Department of Construction Engineering and Management, Purdue University, West Lafayette, IN, USA;3. College of Engineering, Architecture, and Technology, Oklahoma State University, Stillwater, OK, USA;1. Industrial and Systems Engineering, Qatar University, Doha, Qatar;2. Civil and Architectural Engineering, Qatar University, Doha, Qatar;3. Senior Sustainability Expert, Qatar Foundation, Doha, Qatar;4. Qatar Transportation and Traffic Safety Center, Qatar University, Doha, Qatar;5. Department of Sociology, Kazan Federal University, Kazan, Russia;6. Division of Sustainable Development, Hamad Bin Khalifa University, Doha, Qatar;7. Sustainability Director, Qatar Foundation, Doha, Qatar;8. Istanbul Medeniyet University, Istanbul, Turkey;1. Center for Economics, Finance and Management Studies, Hunan University, Changsha, Hunan, China;2. Department of Economics, State University of New York at Buffalo, Buffalo, NY 14260, United States;3. Center for Human Capital and Labor Market Research, Central University of Finance and Economics, Beijing, China |
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| Abstract: | This paper examines the causal links between foreign direct investment (FDI), CO2 emissions, and economic growth in a global panel of 101 countries and four diverse income groups (low, lower-middle, upper-middle, and high) countries using the simultaneous equations framework, with data from 1990 to 2014. Considering physical capital and human capital, this is the first time these two determinants have been linked to the FDI-pollution-growth simultaneous equation model. The dependent variables in the three simultaneous equations are inflow of foreign direct investment, CO2 emissions as a proxy for environmental pollution, and real gross domestic product. Three critical inferences can be drawn from the results. First, there is a two-way causal relationship between growth and FDI in the global panel and across all income groups (except for lower-middle-income groups). Likewise, except for high-income countries, there is a two-way causal relationship between FDI and CO2 emissions in the global panel. Second, the results support a one-way causal relationship between economic growth and CO2 emissions in the global panel and the income subgroup, but only in the low-middle and high-income groups support the environmental Kuznets curve (EKC) and pollution haven hypothesis (PHH). Third, the heterogeneous impact of human and physical capital on the environment is genuinely striking: human capital improves its quality while physical capital degrades it. The results suggest that physical and human capital contributes to economic growth and attracts foreign direct investment. |
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