The effects of foreign direct investment and economic development on carbon dioxide emissions

Abstract

This paper uses a threshold model to estimate the regime-specific marginal effect of foreign direct investment (FDI) and economic development on environmental carbon dioxide (CO2) emissions within different regimes of population density. Our results demonstrate an asymmetrical nonlinear relationship between gross domestic product per capita and CO2 emissions in different regimes of population density. In addition, our results reveal that CO2 emissions decline significantly along with increasing FDI until a certain level of population density is reached. Our results also show that CO2 emissions increase along with increasing value-added in industry during the early and growth stages of the industrial life cycle and decrease during its mature stage, when it has higher energy efficiency.