Do human capital and governance thresholds matter for the environmental impact of FDI? The evidence from MENA countries.

This paper studies whether foreign direct investment (FDI)-CO2 emissions relationship may change depending on the data-driven estimated threshold levels for the country characteristics (CC) including human capital and governance in a sample of 13 Middle East and North Africa (MENA) economies during the 1996-2019 period. Our results strongly suggest that endogenously estimated CC thresholds matter for the impact of FDI on CO2 emissions. The pollution haven hypothesis, which maintains that FDI is associated with higher levels of pollution, appears to be valid for economies with weak CC. In addition to this, the pollution halo argument suggesting FDI lowers the emissions appears to be hold in countries with strong CC. The results in this study may indicate that policies aiming to improve human capital and governance may be expected not only to increase the economic benefits of FDI in terms of growth but also mitigate the negative environmental impacts of FDI in the MENA region.

Industrialization, servicification, and environmental Kuznets curve: non-linear panel regression analysis.

This paper investigates whether the impact of income on CO2 emissions is invariant to endogenously estimated threshold levels for the economic structure (ES) represented by value added in manufacturing, industry, and service sector shares in GDP for a panel of 54 economies over the 1971-2017 period. Our panel smooth transition regression estimation results strongly suggest that the sensitivity of CO2 emissions to income is substantially much higher in countries with higher manufacturing and industry sector shares, whilst it is much lower in servicified economies. Given the argument that manufacturing is the engine of growth, this finding may not necessarily downgrade the crucial importance of an industrial policy which places the manufacturing at the core. The empirical findings in this paper suggest that countries may better to design and implement a strategic and systematic industrial policy which promote the use of emission reduction technologies and encourage manufacturing and industrial sectors with lower carbon emissions.