The impact of FDI on regional air pollution in the Republic of Korea: A way ahead to achieve the green growth strategy?

Abstract

Can FDI help to reduce regional air pollution emissions in Korea? Given the proclamation of a far-reaching national green growth strategy that requires a shift in public and private investments, this paper addresses the need for empirical estimates on the environmental consequences of FDI inflows into Korea. Using a simultaneous equations model the impacts of FDI inflows are decomposed into direct as well as indirect scale, composition, and technique effects. Thereby, the analysis utilizes panel data on six air pollutants in 16 Korean provinces and self-governing cities for the time period 2000 to 2011. The estimation results show that FDI inflows concurrently stimulate regional economic growth and reduce air pollution intensities. However, the total level of air emissions mostly remains unchanged. While confirming the findings of the existing national level research on the FDI-growth relationship in Korea, the results are partly contrary to the respective earlier findings on the FDI-environment nexus. Given Korea's high level of development paired with the aforementioned impact on economic growth and air pollution intensities, foreign investments are, therefore, regarded as one potential pillar to achieve the goals of the green growth strategy.

Analyzing the association between innovation, economic growth, and environment: divulging the importance of FDI and trade openness in India

“…Our results are in contrast with the study of Merican et al (2007) which found that there is no impact of foreign direct investment on carbon emission in context of Singapore. Our results are also contrary with the study of Hille et al (2019) explored the impact of FDI on air pollutions in Korea and found that FDI stimulates regional economic growth and reduces air pollution.…”

“…Furthermore, Hille et al (2019) 2018to test cointegration. Their findings have shown that FDI impedes environmental quality by increasing carbon emissions.…”

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“…As economic factors in our model, both PGDP and FDI can represent regional economic development ( Jiang et al, 2018 ;Hille et al, 2019 ). Based on the OLS results, PGDP has been identified as one of the crucial factors resulting in NGEC increase ( Amri, 2017 ;Ding et al, 2017 ), while FDI shows a minor negative effect on national NGEC, which is similar to the conclusion of Jiang et al (2018) .…”

UK's net-zero carbon emissions target: Investigating the potential role of economic growth, financial development, and R&D expenditures based on historical data (1870–2017)

“…Besides economic growth, factors influencing the pollution level include, among others, institutional quality and democracy ( Tamazain and Rao, 2010 ; You et al., 2015 ), financial development ( Nasir et al., 2019 , Pham et al. 2020 ), trade measures such as trade openness and FDI ( Hille and Shahbaz, 2019 ; Hille et al., 2019 ), urbanization ( Pham et al., 2020 ), transportation ( Nassani et al., 2017 ), general as well as energy innovations ( Shahbaz et al., 2018a ; Yang et al., 2014 ), and government environmental expenditures ( Hille and Lambernd, 2020 ). Although existing studies also treated financial development as an important determinant in pollution modelling, ambiguous results are reported ( Zaidi et al., 2019 ).…”