Impacts of Foreign Direct Investment and Economic Development on Carbon Dioxide Emissions Across Different Population Regimes

Abstract

According to the Green Solow model, the rise or fall of emissions over time depends on a scale effect and a technique effect, and, if the latter effect is held constant, changes in population growth will influence profiles of the environmental Kuznets curve (EKC). Utilizing four alternative measures of population size as threshold variables, this paper reexamines the effect of foreign direct investment (FDI) on carbon dioxide (CO 2 ) emissions and further tests EKC profiles for different population sizes. Our threshold test shows a double-threshold effect on CO 2 emissions, implying the existence of three population regimes: least, moderately, and most populated. Our results show that an inverted U-shaped EKC relationship exists between CO 2 emissions and economic development across different population regimes, when population density and absolute population in turn are used as a threshold variable. In addition, in the least populated regime, CO 2 emissions significantly converge with increasing FDI.