The Effect Of FDI On Economic Growth And Environmental Pollution

This thesis examines the impacts of foreign direct investment on economic growth in emerging markets.Generally speaking,foreign direct investment could foster economic growth with reasons as following.Firstly,foreign direct investment is also a type of investment which could increase capital stock in hosting countries and therefore increases outputs directly.Secondly,developed countries are supposed to superior to developing countries in technology and management.Therefore,hosting countries might be benefited from foreign direct investment via the transfer of advanced technology and management through capital movements across countries.Another issues related to foreign direct investment is environmental pollution,which is also a focus of this thesis.An overwhelming scientific consensus is that our plant is warming up and climate is changing,which is mainly induced by fossil fuel consumption.The emerging markets,which are characterized by rapid GDP growth and relatively complete markets,have contribute to larger and larger part of world's total CO₂emissions.High CO₂ emissions in emerging economies are mainly caused by governments in those countries devote tireless efforts to boost economic growth while keeping environmental protection as a secondary consideration,which threatens their sustainable future.In order to spur economic growth,many governments of the developing countries encourage FDI inflows.However,this might put great threats to its ecological environment,because FDI inflows are considered to be mainly driven by the weak environmental regulations and cheap labor force in the developing countries,which is the“pollution haven”hypothesis.However,not all the existing literature agrees with the pollution haven”hypothesis.The“pollution halo”hypothesis holds that FDI inflows exert positive environmental spillovers to host countries due to its advanced technology.In order to illustrate the effects of FDI,this article puts forward propositions about the production frontier and the environmental frontier.We built an endogenous growth model with intermediate products.In order to capture the effects of FDI on technology.The econometric model adds t,FDI and t*FDI.These empirical findings reveal mainly two important policy implications,which are of particular interest to policymakers as they help build sound economic policies to promote its economic growth as well as ensuring their sustainable future.Firstly,for relatively low-income emerging countries,it is a good idea to promote their economic growth by inviting foreign direct investment.However,for those relatively high-income countries,the effects of FDI on promoting economic growth is not so obvious.Secondly,all emerging markets should attract low-polluted foreign direct investment in order to reduce environmental pollution.Although it is proved by our empirical results that improved technology through inviting FDI can reduce pollution,the current pollution cannot be restored in short time,which deteriorates well-beings in hosting countries.