The impact of foreign direct investments on the CO2 emissions in Southeast Asian countries

Abstract

The pressure to increase the national income per capita sometimes puts the Government of developing countries into a dilemma between economic growth and environmental protection. On the basis of the original model developed by Kuznets (1955) regarding the relationship between a country’s CO2 emissions to the environment and its average income, an empirical test applying the System Generalized Method of Moments (S-GMM) and Pooled Mean Group (PMG) regression to data from 7 Southeast Asian countries during a period of twenty years from 1995 to 2014 is conducted. The results find strong statistical evidence for the existence of an inverted-U effect as the theory assumes. Moreover, the impact of the factor of FDI attraction on the environment which is added to the Kuznets’ original model is also confirmed by the study