Asian Journal of Research in Banking and Finance
Year : 2017, Volume : 7, Issue : 7
First page : ( 287) Last page : ( 298)
Online ISSN : 2249-7323.
Article DOI : 10.5958/2249-7323.2017.00084.0

Impact of Foreign Direct Investment on Environment: Case of Developing Countries

Malhotra Garima

Assistant Professor, Department of Business Economics, Sri Guru Nanak Dev Khalsa College, Delhi University, New Delhi, India

Online published on 17 July, 2017.

Abstract

Foreign Direct Investment (FDI) inflow in the developing countries has been increasing dramatically over the past decades. The “Pollution Haven Hypothesis” is gaining a lot of attention of the economists worldwide to check if this inflow of FDI is driven by the lax environmental regulations in the developing countries and does it lead to relocation of dirty industries in these countries. This paper sets out to test the hypothesis of the link between FDI and Environment in some of the developing countries which are receiving bulk of developed countries’ FDI and are simultaneously facing the problem of increasing pollution levels. It looks at some different ways of approaching the same problem and how some studies reveal different outcomes for different countries. The paper also discusses in brief the game theoretic approach to the government's decisions of environment regulation.

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Keywords

Market failures, Factor Endownment Hypothesis, Nash Equilibrium, Pollution Haven vs Pollution Haloes Hypothesis, OLS Regression.

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