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One district one factory policy of Ghana, a transition to a low-carbon habitable economy?

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Abstract

Ghana has proposed ‘One district, one factory’ policy which would bridge the income gap, improve standards of living, ease dependency ratio, and build up the economy. Based on the past trend of foreign direct investment (FDI) of Ghana, we examine the possible impact of this policy on its environment, validating the pollution haven or halo effect. We examined the validity of the environmental Kuznets curve (EKC) hypothesis. Augmented Dickey–Fuller and Phillips–Peron unit root tests were conducted to examine the presence of unit root among the variables. Johansen cointegration test was also used to examine the long-run relationship. The autoregressive distributed lag approach to cointegration, Granger causality test, and fully modified ordinary least square were the estimation methods employed. A unidirectional relationship was found between FDI and economic growth, FDI and energy consumption, and FDI and CO2 emissions. We found that the EKC was not valid for Ghana, but the pollution haven hypothesis was confirmed for Ghana. We therefore conclude that ‘One district one factory’ policy would only be beneficial if Ghana attracts cleaner industries, environmental regulations get much stringent, and environmentally related taxes are elevated.

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Abbreviations

ARDL:

The autoregressive distributed lag

FMOLS:

Fully modified ordinary least square

FDI:

Foreign direct investment

PHH:

Pollution haven hypothesis

EKC:

Environmental Kuznets curve

GDP:

Gross domestic product

ADF:

Augmented Dickey–Fuller unit root test

PP test:

Phillips–Peron unit root test

VECM:

Vector error correction model

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Acknowledgements

We appreciate the financial support provided by National Natural Science Foundation of China (Nos. 71603105, 71673117), the Ministry of Education of the Republic of Korea and 328 the National Research Foundation of Korea (No. NRF-2018S1A5A2A03036952), Natural 329 Science Foundation of Jiangsu, China (No. SBK2016042936), Science Foundation of 330 Ministry of Education of China (No. 16YJC790067), China Postdoctoral Science Foundation 331 (Nos. 2017M610051, 2018T110054).

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Correspondence to Claudia Nyarko Mensah.

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Mensah, C.N., Dauda, L., Boamah, K.B. et al. One district one factory policy of Ghana, a transition to a low-carbon habitable economy?. Environ Dev Sustain 23, 703–721 (2021). https://doi.org/10.1007/s10668-020-00604-5

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  • DOI: https://doi.org/10.1007/s10668-020-00604-5

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