Moderating role of institutional quality in validation of pollution haven hypothesis in BRICS: a new evidence by using DCCE approach

• Published in: Environmental science and pollution research international Vol. 29; no. 6; pp. 9193 - 9202
• Main Authors: Chaudhry, Imran Sharif, Yin, Weihua, Ali, Syed Ahtsham, Faheem, Muhammad, Abbas, Qaiser, Farooq, Fatima, Ur Rahman, Saeed
• Format: Journal Article
• Language: English
• Published: Berlin/Heidelberg Springer Berlin Heidelberg 01.02.2022; Springer Nature B.V
• Subjects: Aquatic Pollution; Atmospheric Protection/Air Quality Control/Air Pollution; Carbon dioxide; China; Climate change; Earth and Environmental Science; Ecological effects; Ecological footprint; Economic Development; Economic growth; Ecotoxicology; Emerging markets; Emissions; Energy consumption; Energy industry; Environment; Environmental Chemistry; Environmental Health; Environmental Pollution - analysis; Environmental science; Footprint analysis; Foreign investment; Heterogeneity; Hypotheses; Industrial development; Internationality; Investment policy; Investment strategy; Investments; Literature reviews; Pollution; Pollution sources; Research Article; Technological change; Waste Water Technology; Water Management; Water Pollution Control; China; BRICS countries; Foreign direct investment; Institutional quality; DCCE approach; Ecological footprint
• ISSN: 0944-1344; 1614-7499
• DOI: 10.1007/s11356-021-16087-4

The technological innovation and strict environmental protocols in the highly developed regions have become the primary sources for foreign direct investment to move in the pollution haven economies. In this regard, this study attempted to identify the role of foreign direct investment (FDI) in the developing economies of the Brazil, Russia, India, China, and South Africa (BRICS) region. For this reason, a dataset was obtained between 1995 and 2019. Chudik and Pesaran’s ( 2015 ) latest dynamic common correlated effects (DCCE) technique is used because of its new features when integrating the problems of heterogeneity and structural breaks into panel data that are general and do not encompass much recent research in this context. According to the empirical outcomes, foreign direct investment is a source of pollution haven in this region. However, the moderating effect of institutional quality on foreign direct investment has been found negative for ecological footprint. It also found the threshold point where the foreign direct investment effect becomes negative on ecological footprint. Based on these empirical results, this research suggests that foreign direct investment strategy should be maintained in the presence of good institutional efficiency as it enhances the environment and promotes economic development.