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Relationship between inward FDI and environmental degradation for Pakistan: an exploration of pollution haven hypothesis through ARDL approach

Environmental Science and Pollution Research volume 27, pages 15407–15425 (2020)Cite this article

Abstract

In many developing countries, rising pollution and FDI inflows are positively correlated. This paper explores the existence of pollution haven hypothesis in Pakistan by employing the autoregressive distributed lag (ARDL) bounds test on yearly data from 1971 to 2014 for foreign direct investment inflow and four pollutants, i.e., CO2 emissions, CO2 emissions from solid fuels, SO2 emissions, and GHG emissions. In each case, eight different models are tested by incorporating different explanatory variables with foreign direct investment inflow. The outcome of this study shows that in some of the models a positive long-term relationship exists between FDI inflow and CO2 emissions, CO2 emissions from solid fuels, and GHG emissions and a negative long-term relationship between FDI inflow and SO2 emissions. Overall, we found no conclusive evidence of the existence of the pollution haven hypothesis for Pakistan. As Pakistan is taking active measures to attract more FDI, it is essential to introduce appropriate environmental policies and institutional reforms that do not hinder FDI inflows.

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Affiliations

  1. Department of Economics, Government College University Faisalabad, Faisalabad, Pakistan

    Abdul M. Nadeem

  2. School of Economics and Management, North China University of Technology, No. 5 Jinyuanzhuang Road, Shijingshan District, Beijing, 100144, People’s Republic of China

    Tariq Ali & Zhengquan Guo

  3. Department of Economics, Government Postgraduate College, Jaranwala, 37200, Pakistan

    Muhammad T. I. Khan

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  1. Abdul M. Nadeem
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  2. Tariq Ali
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  3. Muhammad T. I. Khan
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  4. Zhengquan Guo
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Correspondence to Tariq Ali or Zhengquan Guo.

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Nadeem, A.M., Ali, T., Khan, M.T.I. et al. Relationship between inward FDI and environmental degradation for Pakistan: an exploration of pollution haven hypothesis through ARDL approach. Environ Sci Pollut Res 27, 15407–15425 (2020). https://doi.org/10.1007/s11356-020-08083-x

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  • DOI: https://doi.org/10.1007/s11356-020-08083-x

Keywords

  • Environment
  • Pollution haven/halo hypothesis
  • ARDL approach
  • Pakistan