KTH/CESIS Working Paper Series in Economics and Institutions of Innovation
The impact of foreign direct investments on regional air pollution in the Republic of Korea: A way ahead to achieve the green growth strategy?
Abstract: Can FDI help to reduce regional air pollution emissions in
Korea? Given the proclamation of a far-reaching national green growth
strategy that requires a shift in both public and private investments, this
paper addresses the need for empirical estimates on the environmental
consequences of FDI inflows into Korea. Using a simultaneous equations
model the impacts of FDI inflows are decomposed into direct as well as
indirect scale, composition, and technique effects. Thereby, the analysis
utilizes panel data on six air pollutants in 16 Korean provinces and
self-governing cities for the time period 2000 to 2011. The estimation
results show that FDI inflows concurrently stimulate regional economic
growth and reduce air pollution intensities. However, the total level of
air pollution emissions mostly remains unchanged. While confirming the
findings of the existing national level research on the FDI growth
relationship in Korea, the results are partly contrary to the respective
earlier findings on the FDI environment nexus. Given Korea’s high level of
development paired with the aforementioned impact on economic growth and
air pollution intensities, foreign investments are, therefore, regarded as
one potential pillar to achieve the goals of the green growth strategy.
Keywords: Foreign direct investments; green growth; air pollution; decomposition analysis; Republic of Korea; province level; (follow links to similar papers)
JEL-Codes: F21; O44; Q53; Q56; (follow links to similar papers)
31 pages, August 30, 2017
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