Investigation of Pollution Haven Hypothesis for China: A Fourier ADL Cointegration Analysis

Abstract

Purpose: This study tests the Pollution Paradise Hypothesis by examining the role of FDI and economic growth on China's load factor over the period 1979-2021. The main objective of this study is to assess the environmental impact of FDI and economic growth in China. Design/Methodology: Various econometric analyses have been carried out to examine FDI, economic growth indicators and the freight capacity factor. In this context, conventional ADF and Fourier ADF unit root tests were applied to the freight capacity factor, FDI and economic growth series and then to the shocks to these series. Findings: In conclusion, it is emphasised that in order to achieve sustainable development goals in China, policy makers should adopt more effective environmental sustainability policies, taking into account the impact on FDI and economic growth. Limitations: It tests the Pollution Paradise hypothesis by examining the role of FDI and economic growth on the load factor in China. The research is therefore specific to China. Originality/Value: This study aims to contribute to the literature by assessing the environmental impact of FDI in China in a more holistic way, and from a perspective that has not been analysed before.