The Determinants of Foreign Direct Investment Under Climate Change

Abstract

Foreign direct investment is very important for the economy of both host countries and home countries, especially for host countries in terms of employment and technology transfer. Many previous researches focused on economic determinants, both micro and macro level, rather on climate-related determinants which become important currently. As a result, this research analyzes the determinants of foreign direct investment under climate change using secondary panel data and fixed effect model. The results show that, real GDP of home countries, real GDP of host countries, and the degree of trade openness of host countries are positively related to foreign direct investment. Conversely, CO2 emissions per capita of home countries and wage rate of host countries are negatively related to foreign direct investment.