The Impact of Foreign Direct Investments and Economic Growth on Environmental Degradation: The Case of the Balkans

Abstract

The aspiration of this study was to examine the impact of foreign direct investments (FDI) and economic growth on environmental degradation in the Balkans for the period 1998–2019. Balkan countries were classified into two groups, high income countries (HIC) and upper-middle income countries (UMIC). Thus, two hypotheses have been set. The effect of FDI on environmental degradation was observed through pollution haven hypothesis (PHH). To examine that connection, we used Pearson correlation for all countries, HIC and UMIC. Furthermore, the impact of economic growth on environmental degradation was tested through the environmental Kuznets curve (EKC) hypothesis. For that purpose, polynomial linear regression was applied. In order to examine the dependence of environmental degradation in relation to all predictors in the model, a multivariate linear regression was used. PHH was confirmed in Serbia, Albania, Croatia, Romania, and Bulgaria, the Balkans as a whole, and HIC, and the EKC hypothesis was rejected. This paper represents a contribution to a very scarce number of studies regarding the impact of FDI and economic growth on the environment in the Balkans, as a whole. The results of this study can be useful to policy makers in the terms of inducting stricter environmental rules.

Renewable and Non-Renewable Energy Consumption in BRICS: Assessing the Dynamic Linkage between Foreign Capital Inflows and Energy Consumption

“…Foreign capital inflows are also vital for renewable energy consumption. Foreign capital inflows improve the host countries' technology spillovers that enrich renewable energy by taking a large amount of technology and funds from foreign [5,14]. This is one of the direct impacts of flows on renewable energy consumption via technology and funds [15].…”

The Environmental Effects of FDI

“…More recently, the effect of FDI on the environment has been examined by Wang et al (2020), Sabir et al (2020), Pavlovic et al (2020), and by Demena and Afesorgbor (2020). Wang et al (2020) examine the case of China and find that FDI inflows lead to a deterioration of environmental quality, thus validating the pollution haven hypothesis.…”

“…Sabir et al (2020) investigate the effect of FDI on the environment in South Asian countries and find evidence for the environmental Kuznets curve and for a negative effect of FDI on the environment. Pavlovic et al (2020) look at the case of the Balkans and produce evidence that supports the pollution haven hypothesis. Contrasting results are obtained by Demena and Afesorgbor (2020) who conduct a meta-analysis of 65 primary studies that produce 1006 elasticities.…”

The relationship between CO2 emissions, economic growth, available energy, and employment in SEE countries

“…Recognizing that these adverse effects of low-carbon transition are more severe in transition countries, authors such as Pavlović et al (2021), Mitić et al (2017), andBecker et al (2018) analyzed the interconnection among economic performances, energy indicators, and environmental effects. Additionally, Li et al (2020) used the example of post-capitalist countries to demonstrate that progress in energy efficiency decreases CO 2 emissions per capita.…”

“…Although SEE economies are on their way to environmental and economic sustainability, their path is still rocky. Poverty, unsolved political problems, unclear environmental protection legislation, brain drain, and other challenges are only some of the issues these countries are dealing with (Pavlović et al 2021). These issues are solvable by effectively implementing a suitable sustainable development strategy.…”