Impact of foreign direct investment on greenhouse gas emissions in agriculture of developing countries

Abstract

This research analyses the impact of foreign direct investment on greenhouse gas emissions in the agriculture sector of developing countries. Panel data from 63 developing countries for the period 2005 to 2014 was used to estimate a dynamic econometric model by applying a system‐generalised method of moments. The empirical results indicate a positive impact of foreign direct investment in agriculture on the carbon dioxide equivalent emission intensity in developing countries. The results provide weak support for the pollution havens hypothesis and imply the importance of coordination between foreign direct investment and environmental policies.

Determinants of agricultural emissions: panel data evidence from a global sample

“…This finding highlights the crucial roles of economic integration in reducing agricultural emissions in the long run, which is in line with the pollution halo hypothesis. The positive short-run impact of FDI inflows on agricultural emissions is probably consistent with evidence found in Kastratović (2019), and the negative influence in the long run is consistent with Pazienza (2015). Additionally, according to our review of the literature, no study has investigated the impacts of trade activities on agricultural emissions.…”

“…In the long run, the results show that income, agriculture value added and energy consumption have significantly positive impacts on agricultural emissions; and trade openness, FDI inflows, export and import have significantly negative effects. Because most of the LMEs in our study sample are developing countries, the negative effects of FDI inflows on agricultural emissions is opposite that of the findings of Kastratović (2019). This difference could be attributable to the different types of FDI inflows used in the empirical estimations.…”

“…This difference could be attributable to the different types of FDI inflows used in the empirical estimations. Kastratović (2019) used data on FDI inflows in agriculture, whereas we use the net inflows of aggregate FDI to the whole economy. Thus, the FDI net inflows to agriculture in LMEs may reduce emissions as expected in Kastratović (2019), but the aggregate FDI inflows as employed in our study do not 7…”

“…Only a few studies have examined the determinants of agricultural emissions. For instance, Kastratović (2019) investigated the impacts of FDI on agricultural emissions but only considered CO 2 emissions and did not conduct a robustness check or short-run and long-run estimations. In another study, emissions from the agricultural sector were decomposed into factors such as economic growth, energy intensity, energy structure, human capital accumulation, emissions factors and labor productivity (Robaina-Alves and Moutinho, 2014).…”

“…(2018) noted that mineral fertilizers, manure in pasture, manure management and agricultural waste burning were the main sources of NH 3 emissions in agriculture for Argentina from 2000–2012. Furthermore, in the context of globalization, trade openness and foreign direct investment (FDI) inflows should also be considered (Kastratović, 2019) because they might be critical sources of emissions for host countries (Naranpanawa, 2011; Pao and Tsai, 2011; Ren et al ., 2014; Le et al ., 2016).…”