The Impact of Foreign Direct Investment on the Ecological Footprints of Nations

We study the effects of foreign direct investment (FDI) on the rate of exhaustion of bioproductive physical land. We test for differential ecological performance of FDI in developed vs. developing countries, as well as in “clean” vs. “dirty” sectors. We examine the impact of six sector-level FDI flows on four ecological footprints (EF): Consumption EF, Production EF, Imports EF, and Exports EF, compiled by the Global Footprint Network. We estimate a dynamic panel model incorporating an Environmental Kuznets Curve (EKC) and differentiating across country development levels. The findings are intriguing. First, High Income countries tend to experience a consumption-related ecological impact of FDI, whereas Low- and Middle-Income countries tend to experience a production-related ecological impact of FDI. Second, the burden of FDI-generated Exports EF is born disproportionately by Middle Income countries; High Income countries bear none (evidence of FDI ecological haven). Third, in High Income countries, financial services FDI reduces the Production EF (evidence of FDI ecological halo). Finally, non-financial services FDI is more ecologically damaging than manufacturing FDI

Globalization and the Environmental Impact of FDI

We analyze the environmental impact of capital inflows and investigate the halo effect (FDI improves the environment). We control for the type of FDI inflows, the EKC (Environmental Kuznets Curve) effect and country income level, and find (i) a differential industry effect: while total foreign investment in aggregate has a negative effect on all countries, this can be traced in particular to capital flows to manufacturing and nonfinancial services sectors.; (ii) an income inequality effect: foreign investment flowing into poorer countries has harmful effects on environment consistent with the race-to-the bottom argument, while capital flowing to richer countries has a beneficial effect and supports the halo effect; (iii) the EKC effect depends on the sector absorbing the FDI and again income level of the country. We show that studies relying only on firm level or aggregate data, miss the sectoral spillovers, and thus may lead to misleading conclusions

Impact of political conflict on foreign direct investments in the mining sector:Evidence from the event study and spatial estimation

This study aims to investigate the impact of conflict on greenfield foreign direct investment (FDI) in the mining sector covering the period of the 1st quarter of 2003 until the 3rd quarter of 2017, across 151 countries. Unlike previous works, this paper focuses on testing two impacts. First, we test for a dynamic impact to uncover the effect of conflict on FDI over the contemporary and subsequent annual quarters. Second, we test for a spatial spillover impact. To achieve these goals, we apply both a panel spatial approach and an event study analysis, using a unique proprietary database FDIMarkets. The main findings are as follows. First, the presence of a dynamic impact depends on the intensity of the conflict for the particular country group, with higher levels of intensity being associated with a higher probability of the presence of a dynamic effect. Second, we find a significant negative spillover impact of greenfield mining FDI of neighbouring countries on the greenfield mining FDI of the FDI-receiving economy. We do not find, however, that conflict in neighbouring countries has a spatial spillover impact on greenfield mining FDI of the FDI-receiving economy.</p

Tracking Greenfield FDI During the COVID-19 Pandemic: Analysis by Sectors

We study the trends and fluctuations in greenfield foreign direct investment (GFDI) during the first wave of the COVID-19 pandemic crisis on a global scale. We analyse the data of a data set of GFDI provided by fDi Markets (Financial Times) to understand the contraction of GFDI during the first three quarters of the year 2020, taking into account the sector of the investment and the host and home country. We analyse both the long-run trends and the quarter-over-quarter changes in GFDI to capture its fluctuations before and during the first wave of the COVID-19 crisis and the 2008 global financial crisis. Our findings cast light on which countries’ and industries’ GFDIs were most affected by the pandemic crisis and draw a comparison to the global financial crisis. To our surprise, many services industries have shown unexpected resilience of GFDI due to the flexibility for remote work. On the contrary, GFDI in the manufacturing industries, as well as the extractives and the utility industries, has shown a dramatic decline during the pandemic. These contractions raise questions of stability and resilience of the global supply chains these industries are a part of. JEL Codes: F2

Analysing the Trend of Illicit Tobacco in the Philippines From 1998 to 2018

Tobacco taxation is the most effective measure to reduce cigarette consumption and consequently improve public health outcomes. It is also an important source of government revenue. The presence of an illicit tobacco market diminishes the public health and fiscal gains of cigarette levies by making cheaper non-taxed cigarettes available. To date, the research on the extent of illicit tobacco trade in the Philippines, despite its potential to inform policies for controlling the supply of illicit cigarettes, has been limited. This study provides an estimate of the size of the illicit tobacco market in the Philippines from 1998 to 2018. It employs gap analysis comparing an estimate of the survey-based adult cigarette consumption with legally sold cigarettes in the Philippines. The illicit trade estimates are contrasted with the evolution of tax changes. The results show that the illicit cigarette market share dropped by 42% from 2003 to 2008 and by an additional 79% from 2008 to 2013. In spite of the large tax increases by the Philippine government through the Sin Tax Law starting from 2013 until 2018, the illicit share in 2018 remains similar to its 1998 level of 16% of the total market. Hence, our study finds no evidence of a positive relationship between tobacco taxes and size of illicit cigarette market in the Philippines

Economic Policy Uncertainty: Global Energy Security with Diversification

Global energy security is a growing worldwide concern in the presence of high economic policy uncertainty (EPU) that can be addressed by advancing sustainable energy diversification (ED) practices. Energy security can be estimated by combining ED and EPU indices; hence, this study uses a dataset covering three continents and 26 countries from 1995 to 2023 to measure energy security employing this approach. The study employs quantile regression and panel data analysis, finding a positive relationship between EPU and ED. The results reveal that when EPU increases, the spectrum of energy sources declines, negatively impacting energy security. Other factors of globalization, Gross Domestic Product, gross capital formation, and the labor force also have an impact on the spectrum of energy sources. To obtain a sustainable level of ED, policymakers should increase investment in gross capital formation because economic growth and openness via pro-global policies have less impact on ED. This study also demonstrates that labor capital shifts have a significant effect on ED. The quantitative results reveal the importance of clear and precise economic policies for increasing investment in carbon-free energy security

The foreign direct investment-environment nexus: does emission disaggregation matter?

This paper examines the effect of foreign direct investment (FDI) on CO2 emissions by using disaggregated emissions data; territorial-based and consumption-based emissions. FDI is measured in three ways; inflow, net inflow, and stock. Employing data over the period 1995–2014 and a number of estimators, the results indicate FDI (whether measured as inflow or net inflow) has negative impact on emissions (irrespective of the measurement). However, the impact is generally found to be greater for the territorial-based emissions. The results of the FDI flow variables largely support the pollution halo hypothesis. Thus, the results are supportive of the robust effect of FDI’s positive effect. Regarding the stock measure, the negative effect of FDI is only found for the territorial-based CO2 emissions. Since the territorial-based emissions capture emissions in the domestic economy only, it is not surprising that the plausible efficiency of FDI stock is found to reduce these emissions rather the consumption-based. FDI stock is now considered part of the local economy. The results of the paper are largely not parallel with previous studies that did not disaggregate CO2 emissions. This we believe is an indication that the measure of CO2 matters for the analyses of the FDI-emissions nexus

Upgrading destruction? How do climate-related and geophysical natural disasters impact sectoral FDI

Purpose The authors investigate natural disasters’ impact on manufacturing and services foreign direct investment (FDI), both, in contemporaneous and time-lag contexts. Manufacturing and services FDI account for different types of technology transfers, respectively, through tangible physical assets and intangible knowledge assets. This paper aims to hypothesize that natural disasters that have pronounced physical impact, have different effect on different sectoral FDI. Design/methodology/approach The authors merge a data set from emergency events database, which covers natural disasters occurrences with a sector-level data on FDI for 69 countries for the period 1980-2011, distinguishing between four different kinds of natural disasters such as meteorological, climate, hydrological and geophysical, as well as between different geographical regions. Findings Controlling for commonly accepted determinants of FDI, such as output growth, quality of institutions and natural resource abundance, the authors find that manufacturing FDI is negatively affected immediately after the disaster and positively in the longer run- a finding that is in unison with the “creative destruction” growth theory. Services FDI, on the other hand, do not show such pattern. Meteorological disasters have no effect on services FDI and climate and hydrological disasters have long-lasting negative effects. For both, manufacturing and services FDI, geophysical disasters have a positive impact on FDI in the long run. Research limitations/implications The study is limited to 69 countries for the period 1980-2011. Practical implications FDI bears tangible and intangible knowledge assets and provides means of financing, even in countries with under-developed banking systems and stock markets. FDI is impacted by climate change, manifested by intensifying and increase of frequency of natural disasters. Social implications Natural disasters destroy infrastructure and displace people. The rebuilding of infrastructure and intangible capital present an opportunity for upgrading. Originality/value This is the first study that analyzes the impact of natural disasters on sector-level FDI in a multicounty and regional context

FDI: Hot or Cold Money? The Behaviour of Sectoral FDI Inflows and Outflows Over Periods of Growth Accelerations and Decelerations

The economic crisis caused by the COVID-19 pandemic invokes questions about a possible prolonged economic deceleration. In this article, we study the impact of output growth accelerations and decelerations, as per the definition of Arbache and Page (2007, More growth or fewer collapses? A new look at long run growth in Sub-Saharan Africa [Working Paper 4384]) and Conceicao and Kim (2010, The asymmetric impact of growth fluctuation on human development: Evidence from correlates of growth decelerations and accelerations. Mimeo), on sector-level foreign direct investment (FDI) inflows and outflows for a group of 34 OECD countries in the period 1995–2019. The results show that Finance services FDI and transport services FDI inflows are countercyclical, while manufacturing FDI outflows are procyclical. Transport services FDI outflows are countercyclical, and the most significant determinant of both FDI inflows and outflows is the control of corruption, respectively, in the host and home countries