CoChat
Sign Up
Cited by 65Energy, Environment, Economic GrowthInternational Business and FDIEnergy and Environmental Sustainability

Foreign direct investments and environmental quality in sub-Saharan Africa: the merits of policy and institutions for environmental sustainability

Open access
Duodu, Emmanuel, Kwarteng, Evans, Oteng-Abayie, Eric Fosu, Frimpong, Prince Boakye·2021·Environmental Science and Pollution Research
DOI 10.1007/s11356-021-15288-1

Published version of a preprint

Open this paper in CoChat — free accountOpen PDF

Abstract

Abstract Environmental concerns in today’s world cannot be overemphasised. These concerns have interested policymakers and researchers to delve into the causes in order to help mitigate environmental deterioration and support policies and institutions for environmental sustainability. This study, therefore, investigates the association between foreign direct investment (FDI) and environmental quality, taking into account policies and institutions for environmental sustainability across 23 Sub-Sahara Africa (SSA) countries. Employing the generalised method of moment (system-GMM) for the analysis, the results revealed, among others things, that FDI improves environmental quality in the long run, whereas in the short run, FDI diminishes environmental quality when interacted with policies and institutions for environmental sustainability. Furthermore, policies and institutions for environmental sustainability and domestic investment improve environmental quality in SSA in both the long and short run. The study, thus, concludes that policies and institutions for environmental sustainability in SSA are important as they improve environmental quality as well as complement FDI to improve environmental quality in the long run. The study further establishes that domestic investment is important to improve environmental quality in SSA. The study recommends policies for improving environmental quality to policymakers and stakeholders in SSA.

The claims and statistics of this paper haven’t been checked yet.

Run the check — free, no account needed. It reads the open-access text and checks the sources it cites.

A few free checks a day · papers already verified open instantly · results are public

Integrity signals

Registry

Crossref · 10.1007/s11356-021-15288-1

Cites

2 of 2 references verified0 citation errors · 0 not checkable

Statistics

Claims the paper makes

The claims and statistics of this paper haven’t been checked yet.

Run the check — free, no account needed. It reads the open-access text and checks the sources it cites.

A few free checks a day · papers already verified open instantly · results are public

Claims other papers make about this one

Each is checked against this paper’s own text: does it say what the citing paper says it does?

  • The marginal effects of the interaction term show the true impact of a unit change in financial development on economic growth better than the coefficient of the interaction term.

    “This is because the marginal effects of the interaction term clearly show the true impact of a unit change in the financial development on economic growth than the coefficient of the interaction term.”

    From The impact of financial development on economic growth in sub-Saharan Africa. Does institutional quality matter? (2023) · cites this paper as Duodu et al. (2021)

    In the discussion following Table 8 (page not provided), the paper says the marginal effect from an interaction term is needed to understand the real effect, rather than relying on the unconditional effect alone. But its analysis concerns foreign direct investment’s effect on environmental quality, conditional on policy and institutions—not financial development’s effect on economic growth. (LLM, conf=0.88)

    Experimental — accuracy not yet measured

Self-check

Percentages, sums and reported differences re-computed from the paper’s own numbers.

The self-check needs the paper’s full text.

Cites

Flagged first, then by citations

Research works printed but not linked: 56

  1. Abdouli M, Hammami S (2017) Investigating the causality links between environmental quality, foreign direct investment and economic growth in MENA countries. International Business Review 26(2):264-278. http://dx.doi.org/10.1016/j.ibusrev.2016.07.004 · DOI
  2. Abid M (2016) Impact of economic, financial, and institutional factors on CO2 emissions: Evidence from Sub- Saharan Africa economies. Utilities Policy 41:85-94. https://doi.org/10.1016/j.jup.2016.06.009 · DOI
  3. Abid M (2017) Does economic, financial and institutional developments matter for environmental quality? A comparative analysis of EU and MEA countries. Journal of environmental management 188:183-194. https://doi.org/10.1016/j.jenvman.2016.12.007 · DOI
  4. Adams S, Boateng E, Acheampong AO (2020) Transport energy consumption and environmental quality: Does urbanization matter?. Science of The Total Environment, 744:140617. https://doi.org/10.1016/j.scitotenv.2020.140617 · DOI
  5. Ahmad M, Jiang P, Majeed A, Raza MY (2020) Does financial development and foreign direct investment improve environmental quality? Evidence from belt and road countries. Environmental Science and Pollution Research 1-16. https://doi.org/10.1007/s11356-020-08748-7 · DOI
  6. Alfaro L (2003) Foreign direct investment and growth: Does the sector matter. Harvard Business School 2003:1- 31. Retrived from https://www.researchgate.net/profile/Laura_Alfaro/publication/228966060_Foreign_Direct_Investment _and_Growth_does_the_sector_matter/links/547c55be0cf2a961e48a01e4.pdf
  7. Aluko OA, Obalade AA (2020) Financial development and environmental quality in sub-Saharan Africa: Is there a technology effect?. Science of The Total Environment 747: 141515. https://doi.org/10.1016/j.scitotenv.2020.141515 · DOI
  8. Ansari MA, Khan NA, Ganaie AA (2019) Does foreign direct investment impede environmental quality in Asian countries? A panel data analysis. OPEC Energy Review 43(2):109-135. https://doi.org/10.1111/opec.12144 · DOI
  9. Arellano M, Bond S (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The review of economic studies 58(2):277-297. https://doi.org/10.2307/2297968 · DOI · Paper page
  10. Arellano M, Bover O (1995) Another look at the instrumental variable estimation of error-components models. Journal of econometrics 68(1):29-51. https://doi.org/10.1016/0304-4076(94)01642-D Asongu SA, Odhiambo NM (2020) Trade and FDI Thresholds of CO2 emissions for a Green Economy in Sub- Saharan Africa (No. 20/072). African Governance and Development Institute. https://doi.org/10.1108/IJESM-06-2020-0006 · DOI
  11. Baloch MA, Wang B (2019) Analyzing the role of governance in CO2 emissions mitigation: The BRICS experience. Structural Change and Economic Dynamics 51:119-125. https://doi.org/10.1016/j.strueco.2019.08.007 · DOI
  12. Bhuiyan MA, Jabeen M, Zaman K, Khan A, Ahmad J, Hishan SS (2018) The impact of climate change and energy resources on biodiversity loss: Evidence from a panel of selected Asian countries. Renewable energy 117:324-340. https://doi.org/10.1016/j.renene.2017.10.054 · DOI
  13. Blundell R, Bond S (1998) Initial conditions and moment restrictions in dynamic panel data models. Journal of econometrics 87(1):115-143. https://doi.org/10.1016/S0304-4076(98)00009-8 · DOI · Paper page
  14. Bokpin GA (2017) Foreign direct investment and environmental sustainability in Africa: The role of institutions and governance. Research in International Business and Finance 39:239-247. https://doi.org/10.1016/j.ribaf.2016.07.038 · DOI
  15. Bosworth BP, Collins SM, Reinhart CM (1999) Capital flows to developing economies: implications for saving and investment. Brookings papers on economic activity 1999(1):143-180. https://doi.org/10.2307/2534664 · DOI
  16. Dietz T, Rosa EA (1994) Rethinking the environmental impacts of population, affluence and technology. Human ecology review 1(2):277-300. Retrieved from https://www.jstor.org/stable/24706840
  17. Duodu E, Baidoo ST (2020) The impact of capital inflows on economic growth of Ghana: Does quality of institutions matter?. Journal of Public Affairs: e2384. DOI: 10.1002/pa.2384. · DOI
  18. Ehrlich PR, Holdren JP (1971) Impact of population growth. Science 171(3977):1212-1217. Retrieved from https://www.jstor.org/stable/pdf/1731166.pdf?casa_token=gmZP5Ueu_3UAAAAA:Xe8YSIAiNWWfy wpyaXfRUrxWU8Ex8EY9Vu7h5zXK8Am4XCa6fqIQe- mtWwCVlHdxKWhGAMZ5Ctgc4etgkOCpLIonI0EmRAxRVw0cxTmq7vnODIKjjv0C
  19. Eskeland GS, Harrison AE (2003) Moving to greener pastures? Multinationals and the pollution haven hypothesis. Journal of development economics 70(1):1-23. https://doi.org/10.1016/S0304- 3878(02)00084-6 · DOI
  20. Esty DC, Dua A (1997) Sustaining the Asia Pacific miracle: environmental protection and economic integration. Peterson Institute Press, All Books.
  21. Farooq F, Chaudhry IS, Yusop Z, Habibullah MS (2020) How do globalization and foreign direct investment affect environmental quality in OIC member countries?. Pakistan Journal of Commerce and Social Sciences 14(2):551-568. Retrieved from https://www.econstor.eu/bitstream/10419/222914/1/1726774856.pdf
  22. Ganda F (2020) The influence of growth determinants on environmental quality in Sub-Saharan Africa states. Environment, Development and Sustainability:1-23. https://doi.org/10.1007/s10668-020-00907- 7 · DOI
  23. Gunarto T (2020) Effect of Economic Growth and Foreign Direct Investment on Carbon emission in the Asian States. International Journal of Energy Economics and Policy 10(5):563-569. DOI: https://doi.org/10.32479/ijeep.10218 · DOI
  24. Hansen LP (1982) Large sample properties of generalized method of moments estimators. Econometrica: Journal of the Econometric Society: 1029-1054. Retrieved from https://www.jstor.org/stable/pdf/1912775.pdf?casa_token=TGLZ9P2sZ4IAAAAA:J4SDT6J8il3BT4S Z8YD76uYbSvjv72YFvtDWDBHBTSgZNmQgHOVIeRBtldDd2vvKOCkemtAYCOK0IlBLZfhYBZ cfbAXXto2PuZRzrajqIs8iyxpY9-tj
  25. Hao Y, Wu Y, Wu H, Ren S (2020) How do FDI and technical innovation affect environmental quality? Evidence from China. Environmental Science and Pollution Research 27(8):7835-7850. https://doi.org/10.1007/s11356-019-07411-0 · DOI
  26. Harris RD, Tzavalis E (1999) Inference for unit roots in dynamic panels where the time dimension is fixed. Journal of econometrics 91(2):201-226.https://doi.org/10.1016/S0304-4076(98)00076-1 · DOI
  27. Im KS, Pesaran MH, Shin Y (2003) Testing for unit roots in heterogeneous panels. Journal of econometrics 115(1):53-74. https://doi.org/10.1016/S0304-4076(03)00092-7 · DOI · Paper page
  28. Jiang Y (2015) Foreign direct investment, pollution, and the environmental quality: a model with empirical evidence from the Chinese regions. The International Trade Journal 29(3):212-227. https://doi.org/10.1080/08853908.2014.1001538 · DOI
  29. Kao C (1999) Spurious regression and residual-based tests for cointegration in panel data. Journal of econometrics 90(1):1-44. https://doi.org/10.1016/S0304-4076(98)00023-2 · DOI
  30. Khan A, Hussain J, Bano S, Chenggang Y (2020) The repercussions of foreign direct investment, renewable energy and health expenditure on environmental decay? An econometric analysis of B&RI countries. Journal of Environmental Planning and Management 63(11):1965-1986. https://doi.org/10.1080/09640568.2019.1692796 · DOI
  31. Kivyiro P, Arminen H (2014) Carbon dioxide emissions, energy consumption, economic growth, and foreign direct investment: Causality analysis for Sub-Saharan Africa. Energy 74:595-606. https://doi.org/10.1016/j.energy.2014.07.025 · DOI
  32. Lee JW (2013) The contribution of foreign direct investment to clean energy use, carbon emissions and economic growth. Energy Policy 55:483-489. https://doi.org/10.1016/j.enpol.2012.12.039 · DOI
  33. Li K, Lin B (2015) Impacts of urbanization and industrialization on energy consumption/CO2 emissions: does the level of development matter?. Renewable and Sustainable Energy Reviews 52:1107-1122. https://doi.org/10.1016/j.rser.2015.07.185 · DOI
  34. Ma CQ, Liu JL, Ren YS, Jiang Y (2019) The Impact of economic growth, FDI and energy intensity on China's manufacturing industry's CO2 emissions: An empirical study based on the fixed-effect panel quantile regression model. Energies 12(24):4800. https://doi.org/10.3390/en12244800 · DOI
  35. Maddala GS, Wu S (1999) A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and statistics 61(S1):631-652. https://doi.org/10.1111/1468-0084. · DOI
  36. Mert M, Bölük G, Çağlar AE. (2019) Interrelationships among foreign direct investments, renewable energy, and CO 2 emissions for different European country groups: a panel ARDL approach. Environmental Science and Pollution Research 26(21):21495-21510. https://doi.org/10.1007/s11356-019-05415-4 · DOI
  37. Naz S, Sultan R, Zaman K, Aldakhil AM, Nassani AA, Abro MMQ (2019) Moderating and mediating role of renewable energy consumption, FDI inflows, and economic growth on carbon dioxide emissions: evidence from robust least square estimator. Environmental Science and Pollution Research 26(3):2806- 2819. https://doi.org/10.1007/s11356-018-3837-6 · DOI
  38. Ojewumi SJ, Akinlo AE (2017) Foreign direct investment, economic growth and environmental quality in sub- Saharan Africa: a dynamic model analysis. African Journal of Economic Review 5(1):48-68. Retrieved from file:///D:/ALL/149252-Article%20Text-392760-1-10-20161209.pdf
  39. Owusu-Ankamah E, Sakyi D (2020) Macroeconomic instability and interest rate spreads in Ghana. Business Strategy and Development: 1-8. https://doi.org/10.1002/bsd2.155 · DOI
  40. Pao HT, Tsai CM (2011) Multivariate Granger causality between CO2 emissions, energy consumption, FDI (foreign direct investment) and GDP (gross domestic product): evidence from a panel of BRIC (Brazil, Russian Federation, India, and China) countries. Energy 36(1):685-693. https://doi.org/10.1016/j.energy.2010.09.041 · DOI
  41. Papke LE, Wooldridge JM (2005) A computational trick for delta-method standard errors. Economics Letters 86(3):413-417. https://doi.org/10.1016/j.econlet.2004.07.022 · DOI
  42. Pedroni P (2004) Panel cointegration: asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric theory: 597-625. DOI: 10.1017/S0266466604203073 · DOI
  43. Pesaran HM (2004) General diagnostic tests for cross-sectional dependence in panels. University of Cambridge, Cambridge Working Papers in Economics: 435. https://doi.org/10.1007/s00181-020-01875-7 · DOI
  44. Pesaran MH (2007) A simple panel unit root test in the presence of cross-section dependence. Journal of applied econometrics 22(2):265-312. https://doi.org/10.1002/jae.951 · DOI · Paper page
  45. Sakyi D, Commodore R, Opoku EEO (2015) Foreign direct investment, trade openness and economic growth in Ghana: An empirical investigation. Journal of African Business 16(1-2):1-15. https://doi.org/10.1080/15228916.2015.1061283 · DOI
  46. Sargan JD (1958) The estimation of economic relationships using instrumental variables. Econometrica: Journal of the Econometric Society: 393-415. https://doi.org/10.2307/1907619 · DOI · Paper page
  47. Saud S, Chen S, Haseeb A (2019) Impact of financial development and economic growth on environmental quality: an empirical analysis from Belt and Road Initiative (BRI) countries. Environmental Science and Pollution Research 26(3):2253-2269. https://doi.org/10.1007/s11356-018-3688-1 · DOI
  48. Seker F, Ertugrul HM, Cetin M (2015) The impact of foreign direct investment on environmental quality: a bounds testing and causality analysis for Turkey. Renewable and Sustainable Energy Reviews 52:347-356. https://doi.org/10.1016/j.rser.2015.07.118 · DOI
  49. Shahbaz M, Balsalobre-Lorente D, Sinha A (2019) Foreign direct Investment-CO2 emissions nexus in Middle East and North African countries: Importance of biomass energy consumption. Journal of cleaner production 217:603-614. https://doi.org/10.1016/j.jclepro.2019.01.282 · DOI
  50. Shahbaz M, Nasreen S, Abbas F, Anis O (2015) Does foreign direct investment impede environmental quality in high-, middle-, and low-income countries?. Energy Economics 51:275-287. https://doi.org/10.1016/j.eneco.2015.06.014 · DOI
  51. Ssali MW, Du J, Mensah IA, Hongo DO (2019) Investigating the nexus among environmental pollution, economic growth, energy use, and foreign direct investment in 6 selected sub-Saharan African countries. Environmental Science and Pollution Research 26(11):11245-11260. https://doi.org/10.1007/s11356-019-04455-0 · DOI
  52. Stern NH, Peters S, Bakhshi V, Bowen A, Cameron C, Catovsky S et al (2006) Stern Review: The economics of climate change. Cambridge University Press, Cambridge 30:2006. http://dx.doi.org/10.1257/aer.98.2.1. Udemba EN (2019) Triangular nexus between foreign direct investment, international tourism, and energy consumption in the Chinese economy: accounting for environmental quality. Environmental Science and Pollution Research 26(24):24819-24830. https://doi.org/10.1007/s11356-019-05542-y · DOI
  53. United Nations Conference on Trade and Development (2019) World Investment Report 2019: Investment and New Industrial Policies. Geneva: United Nations Conference on Trade and Development. Retrieved from https://unctad.org/news/foreign-direct-investment-africa-defies-global-slump-rises-11
  54. Walter I, Ugelow JL (1979) Environmental policies in developing countries. Ambio: 102-109. Retrieved from https://www.jstor.org/stable/pdf/4312437.pdf?casa_token=EdRmzMygSS4AAAAA:SYfAh94wwA2N wYifcFORpd8fdvVVwJ4wemNOSwOkYzqKJsrC72LbqcNIv5neIvK9iv- Yk5WqD0_I6ojw95HAWW4xxT4Y6Bty5MQ4sSL_T60gkW5M-6r- World Bank (2020) World Banks' World Development Indicators. World Bank, Washington DC.
  55. Wu Y, Shen J, Zhang X, Skitmore M, Lu W (2016) The impact of urbanization on carbon emissions in developing countries: a Chinese study based on the U-Kaya method. Journal of Cleaner Production 135:589-603. https://doi.org/10.1016/j.jclepro.2016.06.121 · DOI
  56. Zaman K, bin Abdullah A, Khan A, bin Mohd Nasir MR, Hamzah TAAT, Hussain S (2016) Dynamic linkages among energy consumption, environment, health and wealth in BRICS countries: green growth key to sustainable development. Renewable and Sustainable Energy Reviews 56:1263-1271. https://doi.org/10.1016/j.rser.2015.12.010 · DOI

Cited by

Sorted by citations

Authors
Duodu, E., Kwarteng, E., Oteng-Abayie, E. F., & Frimpong, P. B.
Affiliations
Kwame Nkrumah University of Science and Technology (GH)
Corresponding author
Oteng-Abayie, Eric Fosu
ORCID
Venue
Environmental Science and Pollution Research
Publisher
Springer Science and Business Media LLC
Published
2021-07-30
Volume
28
Issue
46
Pages
66101-66120
ISSN
  • 0944-1344 (ISSN-L)
  • 1614-7499
DOI
10.1007/s11356-021-15288-1
OpenAlex
W3138687455
Cited by
65
References
2
Citations by year
2026: 15 · 2025: 13 · 2024: 22 · 2023: 9 · 2022: 6
FWCI
6.77
Type
journal article
Language
en
Open access
Licence
Locations
  • Environmental Science and Pollution Research (publishedVersion)
  • Research Square (acceptedVersion, cc-by)
  • PubMed (publishedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Energy, Environment, Economic Growth
  • Social Sciences › Business, Management and Accounting › Strategy and Management › International Business and FDI
  • Physical Sciences › Energy › Renewable Energy, Sustainability and the Environment › Energy and Environmental Sustainability
Keywords
foreign direct investment, environmental quality, environmental sustainability, environmental policy, environmental institutions, domestic investment, sub-Saharan Africa
MeSH terms
Carbon Dioxide, Investments, Africa South of the Sahara, Economic Development, Policy

About these checks

Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.

Statistics and arithmetic are recomputed, not judged.

Confidence bands are shown only for fields calibrated on our annotated test set. None is calibrated yet, so no band is shown.

What counts as a claim ›How we measure confidence ›How we check this ›

Are you an author, or do you see a problem with this page? Request a review