Beiträge zur Jahrestagung des Vereins für Socialpolitik 2016: Demographischer Wandel - Session: Environmental Economics: Policy B15-V2
Can FDI help to reduce air pollution emissions in Korea? Given the proclamation of a far reaching national green growth strategy that requires a shift in both public and private investments, this paper addresses the need for empirical estimates on the environmental consequences of FDI inflows into Korea. Using a simultaneous equations model the impacts of FDI inflows are decomposed into direct as well as indirect scale, composition, and technique effects. Thereby, the analysis utilizes panel data on six air pollutants in 16 Korean provinces and self-governing cities for the time period 2000 to 2011. The estimation results show that FDI inflows concurrently stimulate regional economic growth and reduce air pollution intensities. However, the total level of air pollution emissions mostly remains unchanged. Given Korea’s high level of development, foreign investments are, therefore, regarded as one potential pillar to achieve the goals of the green growth strategy.