Investigation of pollution haven hypothesis for China: An ARDL approach with breakpoint unit root tests. (10th September 2017)

• Record Type: Journal Article
• Authors: Sun, Chuanwang; Zhang, Fan; Xu, Meilian
• Is Part Of: Journal of cleaner production. Volume 161(2017)
• Page Start: 153
• Page End: 164
• Publication Date: 2017-09-10
• Subjects: Foreign direct investment -- CO2 emissions -- Pollution haven hypothesis -- Breakpoint unit root tests; Factory and trade waste -- Management -- Periodicals; Manufactures -- Environmental aspects -- Periodicals; Déchets industriels -- Gestion -- Périodiques; Usines -- Aspect de l'environnement -- Périodiques; 628.5
• DOI: 10.1016/j.jclepro.2017.05.119
• Languages: English
• ISSNs: 0959-6526

Abstract

Abstract: China is experiencing a stage of L-type economy while climate change challenge appears tougher and tougher. However, up to now there exists no consensus about whether the influx of foreign direct investment should be responsible for domestic CO2 mounting situation. The study aims to investigate the validity of the Pollution Haven Hypothesis (PHH) in China using 1980–2012 annual time-series data. To achieve this goal, the Autoregressive Distributed Lag Cointegration (ARDL) approach is used to examine the hypothesis, and gross domestic product (GDP), GDP square, energy use, inward foreign direct investment (FDI), economic freedom, urbanization, financial development as well as trade openness are included as major drivers of CO2 emissions. Unlike many previous studies, we also perform breakpoint unit root tests and incorporated a structural break into our model. The results of bounds test show that there is a stable long-run relationship between chosen variables in each model. CO2 emissions will increase by 0.058% with 1% increase in inward FDI (% of GDP), which indicates that PHH does exist in China. Since China could be regarded as a model for developing countries, the results of our study are useful for other developing countries. Highlights: We employ ARDL approach to investigate the pollution haven hypothesis in China. The breakpoint unit root tests are employed to exam a structural break. Carbon dioxide emission is used as an indicator of air condition in our article. The pollution haven hypothesis is confirmed in China.