Do foreign direct investments impact carbon dioxide emissions in countries with low and medium human development? : An empirical study on 60 countries between 1970 and 2018

Abstract: This thesis examines the relationship between foreign direct investments (FDI) and carbon dioxide emissions (CO2) for 60 countries with low and medium human development between 1970-2018. To investigate the relationship between FDI and CO2 both directly and indirectly through increasing rates of GDP, the method used in this investigation is an ordinary least squares (OLS) panel regression with logarithmic FDI inflows (lnFDI) and logarithmic gross domestic product (lnGDP) as independent variables and included year and country fixed effects. The results show a positive relationship between FDI and CO2 as well as GDP and CO2 at the 1 % significance level, suggesting that CO2 emissions rise when FDI inflows or GDP increases. The coefficient for lnFDI was 0.025 and for lnGDP 0.911 using variables with a natural logarithmic transformation, indicating elasticities. The findings emphasize the Pollution Haven Hypothesis.