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Foreign direct investment and environmental pollution in China: a simultaneous equations estimation*

Published online by Cambridge University Press:  02 November 2010

QUN BAO ,
YUANYUAN CHEN  and
LIGANG SONG
QUN BAO*
Affiliation:
Department of International Economics, School of Economics, Nankai University, Tianjin 300071, China. Email: [email protected]
YUANYUAN CHEN
Affiliation:
Department of International Economics, School of Economics, Nankai University, Tianjin 300071, China. Email: [email protected]
LIGANG SONG
Affiliation:
Crawford School of Economics and Government, Australian National University, Canberra, ACT 0200, Australia. Email: [email protected]
*
†Corresponding author
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Abstract

This study investigates the effects of foreign direct investment (FDI) on emissions of five pollutants in China using a panel data set of 29 provinces over the period 1992–2004. The study applies a simultaneous equations estimation technique to estimate the scale, technique and composition effects of FDI on China's overall and regional pollution emissions. The estimation results show that FDI in general helps reduce pollution emissions in China, contributing largely to its technique effect. Capturing both the direct and indirect technique effects improves the accuracy in assessing the environmental impact of the FDI. The study also finds that the environmental impacts of FDI vary significantly among different regions and for different pollutants in China.

Type
Research Article
Information
Environment and Development Economics , Volume 16 , Issue 1 , February 2011 , pp. 71 - 92
Copyright
Copyright © Cambridge University Press 2010

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Footnotes

*

We would like to thank Dr Jane Golley, the two anonymous referees and the Editor of the Journal for providing useful comments and constructive suggestions to improve the work. Qun Bao gratefully acknowledges financial support from the Humanities and Social Science fund of China's Ministry of Education. We ourselves are responsible for any errors that may remain.

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