Utilizing the Environmental Kuznets Curve (EKC) model, the study examines the environmental impacts of institutional variables in their relationships with foreign direct investment (FDI) in 23 developing countries. All six elements of government indicators are tested while controlling their interaction terms with the two types of FDI, which originate from developed and developing regions. There are two important findings: first, FDI is proven to be an important channel to deliver the environmental effects of institutional qualities. Second, FDI origin factor is critical to the nature of this interactive connection. FDI from developed economies is less affected by sociopolitical factors of a host country, while FDI from developing regions reacts differently in different domestic contexts. The study highlights the importance of institutional reform in the pursuit of sustainable development in the developing world, especially when most of emerging countries are prioritizing FDI-led strategy to fuel their rapid economic growth.
EKC FDI FDI origin factor Government indicators Institutional variables Policy
F21 O44 Q56
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I would like to express the sincere gratitude to the anonymous referees whose valuable comments have greatly contributed to the improvement of this paper.
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