Measuring the Effect of Foreign Direct Investment on CO2 Emissions in Laos

doi:10.5814/j.issn.1674-764X.2019.06.014

Abstract

Abstract:

This paper aims to explore the determinants of CO₂ emissions in Laos by accounting for the significant role played by foreign direct investment (FDI) in influencing CO₂ emissions during the period 1990-2017. We apply a Johansen co-integration testing approach to investigate the presence of co-integration, and the empirical findings underscore the presence of a long-run co-integration relationship between CO₂ emissions, FDI, per capita GDP, and industrial structure. We also employ an error-correcting model to examine the short-term dynamic effect of FDI on CO₂ emissions. The empirical results show that FDI has a significant short-term dynamic effect on changes in CO₂ emissions, indicating that the relationship between FDI and CO₂ emissions is an inverted U-shaped curve. This is a validation of the EKC. Changes of FDI, per capita GDP, and industrial structure increase CO₂ emissions. Based on the analysis results, this paper puts forward policy suggestions emphasizing the need for both Laotian policymakers and Chinese investors to improve eco-environmental quality.

Key words: FDI, CO₂ emissions, economic growth, ecological environmental protection, the Green Silk Roads, resources and environmental carrying capacity

XIONG Chenran, WANG Limao, YANG Chengjia, QU Qiushi, XIANG Ning. Measuring the Effect of Foreign Direct Investment on CO₂ Emissions in Laos[J]. Journal of Resources and Ecology, 2019, 10(6): 685-691.

Figures/Tables 7

References 44

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Year	Per capita GDP (US$)	Per capita FDI (US$)	Per capita CO₂ emissions (tons)
1981-1985	2493.59	12.03	4.06
1986-1990	3596.67	29.28	4.20
1991-1995	4674.34	38.61	4.09
1996-2000	5205.36	126.37	4.08
2001-2005	6023.82	126.96	4.30
2006-2010	8579.57	265.76	4.75
2011-2015	9984.41	415.84	4.98

Year	Per capita GDP (US$)	Per capita FDI (US$)	Per capita CO₂ emissions (tons)
1981-1985	2493.59	12.03	4.06
1986-1990	3596.67	29.28	4.20
1991-1995	4674.34	38.61	4.09
1996-2000	5205.36	126.37	4.08
2001-2005	6023.82	126.96	4.30
2006-2010	8579.57	265.76	4.75
2011-2015	9984.41	415.84	4.98

Variable	Symbol	Definition	Unit	Source
Carbon emissions	CO₂	CO₂ emissions from fossil fuels	Kiloton	World Bank
Foreign direct investment	FDI	FDI inward stock	Millions of dollars	UNCTAD
Per capita GDP	PCGDP	GDP to Population	USD	World Bank
Industrial structure	IS	Share of industrial sectors covering GDP	%	the ASEAN Secretariat

Variable	Symbol	Definition	Unit	Source
Carbon emissions	CO₂	CO₂ emissions from fossil fuels	Kiloton	World Bank
Foreign direct investment	FDI	FDI inward stock	Millions of dollars	UNCTAD
Per capita GDP	PCGDP	GDP to Population	USD	World Bank
Industrial structure	IS	Share of industrial sectors covering GDP	%	the ASEAN Secretariat

	lnCO₂	lnFDI	lnPCGDP	lnIS
Mean	6.777592	6.422771	6.720911	3.177491
Median	6.927747	6.446374	6.660189	3.175600
Maximum	7.701083	8.788746	7.461870	3.558201
Minimun	5.359836	2.564949	6.135565	2.667228
Std.dev.	0.747343	1.634706	0.416619	0.231562
Skewness	-0.679633	-0.780247	0.261508	-0.343778
Kurtosis	2.141819	3.060081	1.825126	2.314039
Jarque-Bera	3.014756	2.845212	1.929521	1.100489
Probability	0.221490	0.241085	0.381075	0.576809

Measuring the Effect of Foreign Direct Investment on CO₂ Emissions in Laos

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Variables	Type (C,T,K)	ADF value	Critical values			Test result
Variables	Type (C,T,K)	ADF value	1%	5%	10%	Test result
lnCO₂	(C,0,0)	2.375	-2.653	-1.954	-1.610	unstable
lnFDI	(C,0,1)	1.010	-2.657	-1.954	-1.609	unstable
(lnFDI)²	(C,T,1)	-2.697	-4.356	-3.595	-3.233	unstable
lnPCGDP	(C,T,0)	-2.257	-4.339	-3.587	-3.229	unstable
lnIS	(C,T,1)	-3.084	-4.356	-3.595	-3.233	unstable
DlnCO₂	(C,0,0)	-4.067	-2.657	-1.954	-1.609	stable
DlnFDI	(C,0,0)	-1.848	-2.656	-1.844	-1.609	stable
D(lnFDI)²	(C,T,0)	-2.868	-3.711	-2.861	-2.629	stable
DlnPCGDP	(C,T,0)	-4.364	-4.356	-3.595	-3.233	stable
DlnIS	(C,T,1)	-4.861	-4.374	-3.603	-3.238	stable

No. of Eqn(s)	Eigenvalue	Trace statistic	5% critical value	P-value
None*	0.820	116.592	69.819	0.000
At most 1*	0.688	71.994	47.856	0.000
At most 2*	0.614	41.682	29.797	0.001
At most 3*	0.435	16.933	15.495	0.030
At most 4	0.077	2.077	3.841	0.150

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