FDI and environmental pollution nexus in China

Abstract: Our paper studies the foreign direct investment (FDI)-pollution nexus based on China’s province level panel data from 2005 to 2014. The analysis focuses not only on a national panel (including all provinces), but also on three regional panels (provinces are divided by economic region. We applied dynamic panel data model with lagged variables based on general moment method (GMM) to capture causality. Because of the complexity of our data, the empirical results are quite complicated when it comes to different geographic regions and environment indicators. Overall, we find some evidence that FDI and environmental pollution causally interact with each other.