FDI và ô nhiễm môi trường: Vai trò của chính sách công ở các quốc gia đang phát triển ttta

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY -Huỳnh Văn Mười Một FDI AND ENVIRONMENTAL POLLUTION: THE ROLE OF PUBLIC POLICY IN DEVELOPING COUNTRIES Major: Finance and Banking Code: 9340201 SUMMARY OF PHD THESIS Hồ Chí Minh City - 2019 2 CHAPTER 1: INTRODUCTION 1.1 The reason for study Practical contexts indicate that the issue of environment poluttion (EP) is currently alarming (Abid et al., 2016; DEFRA, 2010; Hill, 2010; Victor, 2017) However, current solutions to improve environment poluttion are not as effective as expected and need to be studied (Hill, 2010; Kuiper & Van den Brink, 2012; Welford, 2016) In response to this problem, many climate change conferences have been organized, thereby encouraging governments of countries to join hands to solve environmental issues, such as: Kyoto 1997 on emission reductions; The 2016 Paris Agreement on Climate Change However, these efforts are not enough to improve the current environmental situation (Kuiper & Van den Brink, 2012) In the context of theory, although many studies support the hypothesis of the environmental Kuznets-EKC curve (Dinda, 2004; Grossman & Krueger, 1995; Roca et al., 2001; Ulanowicz, 2012; Welford, 2016), But there are still many issues that need to be clarified For example, the STIRPAT model explains three main factors affecting the level of environment poluttion: population, affluence and technology Based on this background, empirical studies have explored factors that affect the level of EP, but there is still a large gap of test evidence (McGee et al., 2015; M Wang et al., 2011; York et al., 2003) A review of studies shows that the inconsistency of the impact of FDI on the level of environment poluttion or the relationship between growth targets and the environment depends on the role of government in each country (Cole et al et al, 2006; Damania et al., 2003; Gani & Scrimgeour, 2014; López & Palacios, 2014; Selden & Song, 1994; DT Wang & Chen, 2014; DT Wang et al., 2013) Meanwhile, studies focusing on the role of government in the aspect of public policy in the relationship between FDI and environment poluttion are still modest and focused in the case of developed economies (Halkos & Paizanos, 2016; Lopez et al., 2011; López & Palacios, 2014) From the above comments, it can be seen that it is necessary and urgent to study the role of government in the aspect of public policy in the relationship between FDI and environment poluttion, both in practical contexts and in research gaps Accordingly, the author selects and implements the topic "FDI and environmental pollution: The role of public policy in developing countries" 1.2 The objectives and research questions In order to assess the role of government (institutions and public policies) in the relationship of FDI - Environmental pollution in developing countries in the period of 2002-2014, the thesis will accomplish four objectives Specific analysis is as follows: (1) Empirically assess the impact of factors on the level of environmental pollution in developing countries (2) Empirically assess the impact of FDI on the level of environmental pollution in developing countries (3) Empirically assess the role of institutions in the relationship between FDI and environmental pollution (4) Empirically assess the role of public policy in the relationship between FDI and environmental pollution 4 1.3 Research objects and scope of the study Regarding the scope of the research, the research focuses on the impact of FDI on CO2 emissions and takes into account the role of institutions and public policies in developing countries during 2002-2014 1.4 Scope of the Study The main empirical method is the two-step GMM estimation proposed by Roodman (2006) 1.5 The structure of the thesis The thesis consists of chapters, specifically the chapters are designed as follows: Chapter Overview of research topics; Chapter Theoretical basis of the research topic; Chapter Research process and research methods; Chapter Results and discussion; and Chapter Conclusion and policy recommendations CHAPTER 2: LITERATURE REVIEW 2.1 Explore the factors affecting the environment 2.1.1 Explore the factors affecting the environment Environment Kuznets Curve (EKC) In the 1950s, Simon Kuznets introduced the theory of the Kuznets curve, explaining the relationship between growth and EP From this basis, studies of Grossman & Krueger (1991, 1995), World Bank (1992), Panayotou (1993) and other studies have developed this hypothesis, explaining the relationship between growth and EP has an inverted U shape (inverted U shape) STIRPAT model The STIRPAT model explains the ecosystem that is influenced by the main factors of population, technology and affluence (Dietz & Rosa, 1994; Dietz & Rosa, 1997; York et al., 2003) Over time, the STIRPAT model has been developed through refining and measuring the components of the model 2.1.2 The impact of FDI on environmental pollution According to D T Wang et al (2013), the impact of FDI on environmental quality is still controversial with two conflicting hypotheses The pollution halo hypothesis explains that FDI will help improve environmental issues (Antweiler et al., 2001; G Eskeland & Harrison, 2003; Zarsky, 1999) Meanwhile, the pollution haven hypothesis states that developing countries, which attract a lot of FDI inflows, will gradually become "pollution havens" compared to water developed by industrialization (Aliyu et al., 2005; Arrow et al., 1995; Wheeler, 2001) Hypothesis 1: FDI has a positive effect on the level of environmental pollution in developing countries 2.2 The role of government in the relationship between FDI and environmental pollution 2.2.1 The role of institutions in the relationship between FDI and environmental pollution The new theory of institutional economics states that institutions play an important role in the environment researches (Fernández Fernández et al, 2018; Ménard, 2011; Paavola, 2007) According to Ménard (2011), four institutional components have special significance when it comes to establishing, allocating and monitoring rights: law, politics, administration and ideology The arguments have shown that regardless of the component, the institution also affects the issue of EP However, the impact of institutions on the level of environmental contamination may be positive or negative For developing countries, the author estimates the impact of institutions on EP with the expectation that good institutions will reduce the level of EP Hypothesis 2: Institutions have a negative impact on the level of EP in developing countries Research shows that institutions play a significant role in a market economy Good institutions form the basis for economic activities, including FDI Therefore, in this case study, the author expects that good institutions will also help reduce the negative impact of FDI on the environment Hypothesis 3: Institutions reduce the positive impact of FDI on the level of EP in developing countries 2.2.2 The role of public policy in the relationship between FDI and environmental pollution Lopez et al (2011) and Adewuyi (2016) argue that public spending on public goods not only has a positive impact on economic growth but also creates a scale-up effect on environmental protection Hypothesis 4: Public spending has a negative impact on the level of environmental pollution in developing countries Many scholars support the argument of Pigou tax and the level of EP (Bluffstone, 2003; G S Eskeland & Jimenez, 1992) The principle of effective environmental taxation according to Pigou is that the pollution tax levied on each unit of output resulting in EP is equal to the external costs caused by this product unit on the environment at the output level social optimization Hypothesis 5: Taxes have a negative impact on the level of environmental pollution in developing countries De Santis & Stähler (2009) studied the linkage of FDI, taxes and environmental quality between the two countries (investing and receiving countries) Instead of establishing optimal tax policies to eliminate pollution effects, developing countries can create preferential tax policies (tax reductions) to attract maximum FDI inflows for growth purposes Hypothesis 6: Tax reduces the positive effect of FDI on the level of environmental pollution in developing countries The hypothesis of the "impulse" effect is that increasing public spending on public goods such as education, health and research and development (R&D) will encourage the private sector to improve technology, production and consumption of “green” goods (Adewuyi, 2016) The "crowding out" hypothesis explains that public sector investment can directly substitute for private sector investment In addition, a loan or tax increase to create a budget for public spending will make it more difficult for private companies of the economy to access capital because of the limited financial resources ( Devarajan & Zou, 1994; Greene & Villanueva, 1991) ” Hypothesis 7: Public spending reduces the positive effect of FDI on the level of environmental pollution in developing countries 2.3 Empirical studies 2.3.1 Empirical studies on the trade-offs between income and environment (Kuznets -EKC environmental hypothesis) 2.3.2 Empirical studies on the impact of FDI on environmental quality 2.3.3 Empirical studies on the role of institutions in the relationship between FDI and environmental quality 2.3.4 Empirical studies on the role of public policy in the relationship between FDI and environmental quality CHAPTER - RESEARCH PROCESS AND RESEARCH METHODS 3.1 Empirical model Model (1): Assessing the impact of factors on the level of environmental pollution Research and implement the model of Gani & Scrimgeour (2014), Abid et al (2016) and expand as follows: Where i and t represent country i and the time period t; is the variable representing the level of EP, is initial income; is a set of control variables: domestic investment; trade openness, energy consumption, infrastructure development as well as urbanization Examining the inverted U-shaped effect of the EKC hypothesis, the thesis put into the variable Based on the studies of Halkos (2003), Tamazian & Rao (2010), the thesis proposes the model (3.2) as follows: Model (2): The impact of FDI on environmental pollution in developing countries In particular, FDI is the representative variable of foreign investment capital, which is measured by the amount of FDI invested in the country i in year t (% of GDP) Model (3): Assessing the role of institutions in the relationship between FDI and environmental pollution in developing countries is a representative variable of the institution, which is determined by the measures of public administration of country i in year t and the average index of public governance is the interaction variable between the average public governance index and the amount of FDI Model (4): Assessing the role of public policy in the relationship between FDI and environmental pollution in developing countries Based on a review of previous studies (Abdouli & Hammami, 2017; Bakhsh et al, 2017; Fukui & Miyoshi, 2017; González & Hosoda, 2016); Accordingly, the experimental models will have the following form: In which: is a variable representing taxes; is a variable representing public spending; , are the interaction variables between FDI and tax respectively; FDI and public spending 3.2 Two-step system GMM estimation method of Arellano-Bond 10 Taking advantage of the advantages of dealing with econometric issues such as chain correlation, non-fixed variance and especially endogenous phenomena, the main estimation method applied is the two-step GMM estimation method (Arellano & Bond, 1991; Holtz-Eakin et al., 1988) proposed by Roodman (2006) S-GMM use topics for all estimation models; Therefore, the discussion is mainly based on the results from this method In addition, in order to test the reliability of the test results from the GMM method, Hansen / Sargan tests on instrument variables and quadratic series correlation AR (2) were also performed 3.3 Data description and selection of variables The research data of the project are secondary data collected from the World Bank's data source: the World Development Indicators (WDI); Institutional indicators are collected from the Global Governance Indicators (WGI) The study extracted data from 86 developing countries around the world, from 2002 to 2014 CHAPTER - RESULTS AND DISCUSSION 4.1 Assess the impact of factors on the level of environmental pollution 4.1.1 Assess the impact of factors on the level of environmental pollution Table 4.1 The impact of income on CO2 emissions in developing countries Dependent variable: CO2 emission (lnco2) Variable/method Fixed Effects GMM hệ thống 11 Previous CO2 emssion 0.6208*** 0.9085*** Income (lnrgdp) 0.1363*** 0.0143** Invest (dinv) 0.0047*** 0.0032*** Openess (open) 0.0001 0.0001** Infrastructure (tinf) 0.0025** 0.0033*** Energy consumption (energy) 0.0001*** 0.0001*** Urbanization (urban) 0.0013 0.0020*** Industrialization (industry) 0.0014 0.0009*** Hausman test 0.000 Hansen test 0.3464 Sargan test 0.3765 AR(2) 0.8479 Number of instruments 71 Source: author’s computation The results show that: per capita income (lnrgdp); domestic investment (dinv); trade openness (open); infrastructure (tinf); energy consumption (energy); The degree of urbanization and industrialization has a positive effect on CO2 emissions in developing countries 4.1.2 Test the hypothesis of the Kuznets-EKC environmental curve Table 4.2 The impact of income on CO2 emissions in developing countries (testing EKC hypothesis) Dependent variable: CO2 emission (lnco2) Variable Previous CO2 emssion Income (lnrgdp) Income^2 (lnrgdp2) Linear model (3.1) 0.9085*** 0.0143** Unlinear Model (3.2) 0.8896*** 0.3563*** -0.0200*** 12 Invest (dinv) Openess (open) Infrastructure (tinf) Energy consumption (energy) Urbanization (urban) Industrialization (industry) Hansen test Sargan test AR(2) Number of instruments Source: author’s computation 0.0032*** 0.0001** 0.0033*** 0.0001*** 0.0020*** 0.0009*** 0.3238 0.1264 0.2467 66 0.0027*** 0.0002*** 0.0031*** 0.0001*** 0.0012** 0.0004** 0.1942 0.1161 0.2589 66 The estimated results show that, when adding the square income variable to the empirical model, the sign of the square income variable (rgdp2) changes compared to the income variable (rgdp) The reversal of this effect indicates the possibility of nonlinear relationships between the independent and dependent variables (Thanh, 2014) Therefore, to check whether there is a nonlinear relationship between income and EP in this case as well as determining the threshold value, if any, the author uses the threshold estimation method of Hansen (1999) with Number of times bootstrap is 300 times: Table 4.3 Results of estimating the threshold of income impact on the level of EP in developing countries Source: author’s computation Thus, the results have not shown the nonlinear impact of income on the level of EP in this case study because the threshold value is not statistically significant 13 4.2 Examining the impact of FDI on environmental pollution in developing countries Table 4.4 The impact of FDI on CO2 emissions in developing countries Dependent variable: CO2 emission (lnco2) Variable Previous CO2 emssion Income (lnrgdp) Income^2 (lnrgdp2) Invest (dinv) Openess (open) Infrastructure (tinf) Energy consumption (energy) Urbanization (urban) FDI (fdi) Hansen test Sargan test AR(2) Number of instruments Source: author’s computation Beta 0.9205*** 0.0196*** 0.0020*** 0.0001 0.0026*** 0.0000*** 0.0016*** 0.0011*** 0.0018*** 0.4472 0.5252 0.9049 71 The results show that the impact dimensions of the control variables are similar to the previous test results, showing the stability of the test 14 results Meanwhile, FDI has a positive effect on CO2 emissions in the case of developing countries This result shows the existence of "pollution paradise" hypothesis (1992) in this case study and is similar to previous studies such as Abdouli & Hammami (2017), Behera & Dash ( 2017), Sapkota & Bastola (2017), Solarin et al (2017) 4.3 Testing the role of institutions in the relationship between FDI and environmental pollution in developing countries 4.3.1 The role of institution for the environment Table 4.5 The impact of institutional aspects on developing countries' CO2 emissions Dependent variable: CO2 emission (lnco2) Variable Previous CO2 emssion Model ins1 0.9216*** Model ins2 0.9176*** Model ins3 0.9334*** Income (lnrgdp) 0.0295*** 0.0383*** 0.0164* Invest (dinv) 0.0021*** 0.0023*** 0.0015*** Openess (open) 0.0001*** 0.0001** 0.0001** Infrastructure (tinf) 0.0018*** 0.0021*** 0.0016*** Energy consumption (energy) 0.0000*** 0.0000*** 0.0000*** Urbanization (urban) 0.0007* 0.0010** 0.0004 Industrialization (industry) 0.0005*** 0.0005** 0.0010*** FDI (fdi) 0.0018*** 0.0018*** 0.0015*** Corruption control (ins1) -0.0214*** Governmental efficiency (ins2) -0.0228*** Political stability (ins3) Hansen test 0.4377 0.4332 -0.0096*** 0.3561 Sargan test 0.501 0.5182 0.4429 AR(2) 0.9191 0.8962 0.868 15 Number of instruments 72 72 72 Variable Model ins4 Model ins5 Model ins6 Previous CO2 emssion 0.9314*** 0.9220*** 0.9359*** Income (lnrgdp) 0.0193** 0.0386*** 0.0026 Invest (dinv) 0.0013*** 0.0020*** 0.0012*** Openess (open) 0.0002*** 0.0001*** 0.0002*** Infrastructure (tinf) 0.0018*** 0.0015*** 0.0020*** Energy consumption (energy) 0.0000*** 0.0000*** 0.0000*** Urbanization (urban) 0.0009** 0.0005 0.0011*** Industrialization (industry) 0.0005** 0.0003** 0.0009*** FDI (fdi) 0.0018*** 0.0017*** 0.0017*** Quality of law (ins4) -0.0214*** rule of law (ins5) Voice and accountability (ins6) -0.0265*** -0.0056 Hansen test 0.408 0.4071 0.4364 Sargan test 0.5281 0.5034 0.5155 AR(2) 0.8854 0.8843 0.8789 Number of instruments Source: author’s computation 72 72 72 The table above shows all the institutional indices that have a significant negative impact on CO2 emissions in developing countries, showing consistency for all institutional component variables This finding is similar to the studies of Lau et al (2014), Gani & Scrimgeour (2014), Ibrahim & Law (2015) and Solarin et al (2017) As such, improving the quality of institutions is one of the important factors helping to limit the level of EP in these countries 16 4.3.2 The role of institutions in the relationship between FDI and environmental pollution Table 4.6 Institutional role, FDI to developing countries' CO2 emissions Dependent variable: CO2 emission (lnco2) Variable Previous CO2 emssion Institution 0.9332*** Institution x FDI 0.9451*** Income (lnrgdp) 0.014 0.0398*** Invest (dinv) 0.0015*** 0.0001 Openess (open) 0.0002*** 0.0001 Infrastructure (tinf) 0.0017*** 0.0007*** Energy consumption (energy) 0.0000*** 0.0000** Urbanization (urban) 0.0007* 0.0003 Industrialization (industry) 0.0007*** 0.0021*** FDI (fdi) 0.0017*** 0.0030*** Institution (ins) -0.0156*** -0.0173** 0.4093 0.4988 0.8785 72 -0.0008* 0.5441 0.541 0.7594 72 fdi x ins Hansen test Sargan test AR(2) Number of instruments Source: author’s computation The table above shows that the average institutional variation also has a negative impact on CO2 emissions, implying an important role of improving institutional quality in the formulation of environmental protection policies Moreover, the interaction variable between FDI and institutions (fdi x ins) is also negative, implying that improving 17 institutional quality will reduce the negative impact of FDI on the environment (Bissoon, 2011) 4.4 Testing the role of public policy in the relationship between FDI and environmental pollution in developing countries 4.4.1 The role of public policy on the environment Table 4.7 Role of public policy for CO2 emissions in developing countries Dependent variable: CO2 emission (lnco2) Variable Previous CO2 emssion Tax 0.9117*** Public expenditure 0.9455*** Income (lnrgdp) 0.0668*** 0.0167 Invest (dinv) 0.0027*** 0.0010** Openess (open) 0.0004*** 0.0004*** Infrastructure (tinf) 0.0012*** 0.0011* Energy consumption (energy) 0.0001 0.0001 Urbanization (urban) 0.0002 0.0003 Industrialization (industry) 0.0023*** 0.0015*** FDI (fdi) 0.0009*** 0.0021*** Institution (ins) -0.0173** -0.0121* Tax (trev) Public expenditure (pubexp) -0.0027*** Hansen test 0.4954 0.3699 Sargan test 0.2857 0.5062 AR(2) 0.9749 0.9585 Number of instruments 72 68 Source: author’s computation -0.0010* 18 The estimation results show that taxes and public expenditures have a negative impact on the level of EP In other words, the increase in taxes and public spending create positives, helping to improve the environment 4.4.2 The role of public policy in the relationship between FDI and environmental pollution Table 4.8 Role of public policy, FDI to CO2 emissions in developing countries Dependent variable: CO2 emission (lnco2) Variable Previous CO2 emssion Tax 0.9111*** Public expenditure 0.9359*** Income (lnrgdp) 0.0695*** 0.0483*** Invest (dinv) 0.0028*** 0.0015*** Openess (open) 0.0004*** 0.0002*** Infrastructure (tinf) 0.0011*** 0.0011** Energy consumption (energy) 0.0001 0.0001** Urbanization (urban) 0.0001 0.0003 Industrialization (industry) 0.0024*** 0.0019*** FDI (fdi) 0.0023*** 0.0104*** Institution (ins) -0.0149* -0.0205** Tax (trev) fdi x trev Public expenditure (pubexp) fdi x pubexp -0.0018*** -0.0001*** Kiểm định Hansen 0.4564 0.3722 Kiểm định Sargan 0.2161 0.4298 Kiễm định AR(2) 0.7641 0.906 -0.0012 -0.0005*** 19 Số biến công cụ 72 70 Source: author’s computation The results show that the interaction variable between FDI and public expenditure is statistically significant, indicating that appropriate public spending policies such as spending on education, research and development will help promote public improvement activities technology, thereby helping to reduce the negative impact of FDI on EP Similarly, the statistically significant interaction between tax and FDI emphasizes the limited impact of business activities and consumption of taxes on enterprises, including FDI enterprises CHAPTER - CONCLUSIONS AND POLICY IMPLICATIONS 5.1 Conclusions and contributions of research topics 5.1.1 Conclusion Actual figures show that EP has become a major problem in developing countries The practical context indicates that the current issue of EP is very alarming Meanwhile, in the theoretical context, the role of the factors affecting the level of EP still has many gaps that need to be addressed However, the trend, the level of impact as well as the transmission channel of these factors have not been clarified and reached a consensus, both theoretical and empirical evidence Accordingly, from the theoretical profile and the practical context, the thesis focuses on clarifying the relationship between FDI and EP as well as assessing the role of government in both institutional and public policy aspects 5.1.2 The theoretical contributions 20 This research topic has approached in a relatively different way than previous studies, specifically: research explores the impact of factors on the level of EP and test the EKC hypothesis In particular, the thesis focuses on clarifying the effect of FDI on pollution levels in developing countries with two highlights: firstly, the thesis uses an appropriate estimation method for current treatment with endogeneity and sequence correlation (two-step GMM system) and new updated data for the period 2002-2014; Secondly, the thesis assesses the role of government in the relationship between FDI and EP in both aspects: institution and public policy 5.2 Policy implications 5.2.1 Policies for developing countries Firstly, governments in developing countries should make stronger institutional reforms as well as establish effective public policies to create an effective environment for attracting quality FDI inflows with advanced production technology, environmentally friendly Secondly, the stable governance environment is the foundation for economic growth and environmental sustainable development Therefore, institutional frameworks are relevant to both economic growth and sustainable environmental development Institutions reflect our ability to manage growth and the environment Third, people and businesses must comply with environmental regulations and raise their awareness of environmental protection through the observance of environmental institutions 21 Fourth, each country must follow international environmental agreements to enhance environmental sustainability and reduce air pollution 5.2.2 Policy implications for Vietnam Policies on FDI attraction and management in Vietnam need to be carefully considered to balance economic growth and environmental protection 5.3 Limitations of the topic and future research directions According to the author's subjective opinion, the main limitation points of the topic are: (1) policy recommendations are general and not specific for each country; (2) CO2 emissions are not a sufficiently representative variable for the current pollution situation in the world; (3) No model has been developed explaining the interaction between variables to EP level at the same time; (4) Due to the limitations of the detailed tax structure data source, especially the environmental tax, the thesis has not conducted empirical tests related to the Pigou tax theory in this case study; (5) Using only GMM testing method in experimental testing and (6) The thesis only focuses on considering the impact of fiscal policy on EP as well as the role of fiscal factors in the relationship relationship between FDI and the level of EP For future studies, researchers should consider the role of institutional quality and public policy in the relationship between FDI and environmental quality for individual countries to ensure more practical policy recommendations for each country In addition, future studies may explore the relationship between FDI and variables related to green investment and green economy 22 23 LIST OF AUTHOR’S PUBLICATION Bùi Thị Mai Hoài & Huỳnh Văn Mười Một (2017) FDI, quản trị công chất lượng môi trường nước phát triển Tạp chí Phát triển kinh tế, 28(8), tháng 8/2017, trang 4-25 Huỳnh Văn Mười Một (2017) Tác động chất lượng quản trị công lên FDI nước phát triển Tạp chí Khoa học Kinh tế, vol (04), năm 2017, trang 88-98 Huỳnh Văn Mười Một & Diệp Thanh Tùng (2018) Mối quan hệ thuế, FDI chất lượng môi trường nước phát triển Tạp chí Cơng nghệ Ngân hàng, số 146, tháng 5/2018, trang 8-21 Huỳnh Văn Mười Một (2016) Tác động chất lượng thể chế lên đầu tư công tỉnh/thành Việt Nam Đề tài nghiên cứu khoa học, Trường Đại học Trà Vinh  ... lượng môi trường nước phát triển Tạp chí Phát triển kinh tế, 28(8), tháng 8/2017, trang 4-25 Huỳnh Văn Mười Một (2017) Tác động chất lượng quản trị công lên FDI nước phát triển Tạp chí Khoa học... quan hệ thuế, FDI chất lượng môi trường nước phát triển Tạp chí Cơng nghệ Ngân hàng, số 146, tháng 5/2018, trang 8-21 Huỳnh Văn Mười Một (2016) Tác động chất lượng thể chế lên đầu tư công tỉnh/thành... between FDI and variables related to green investment and green economy 22 23 LIST OF AUTHOR’S PUBLICATION Bùi Thị Mai Hoài & Huỳnh Văn Mười Một (2017) FDI, quản trị công chất lượng môi trường