Assessing The FDI-Environment Nexus Using The Load Capacity Factor: A Seemingly Unrelated Regression Approach For G7 And Brics-T

Öz

The pursuit of economic growth has intensified countries’ efforts to attract foreign direct investment; however, growing concerns regarding the environmental consequences of such inflows underscore the need for broader and more comprehensive ecological indicators. This study contributes to the literature by examining the relationship between foreign direct investment and the load capacity factor, a holistic environmental quality measure that captures both ecological demand and ecological supply, thereby moving beyond traditional pollution-based metrics. Through this focus, the study also engages with the theoretical expectations of the Pollution Haven and Pollution Halo hypotheses. In addition, the study tests the load capacity curve hypothesis, which proposes that environmental quality initially deteriorates as income increases but improves once a certain level of economic development has been achieved.

Using data from G7 and BRICS-T countries for the period 1992–2022, and estimating a Seemingly Unrelated Regression model, the findings reveal a negative and statistically significant relationship between foreign direct investment and the load capacity factor for BRICS-T economies, consistent with the Pollution Haven hypothesis. In contrast, for G7 countries, the relationship between foreign direct investment and the load capacity factor is not statistically significant, whereas per capita income displays the expected nonlinear pattern supporting the load capacity curve hypothesis. Overall, the results indicate that foreign direct investment places additional ecological pressure on emerging economies, whereas environmental quality in advanced economies improves after reaching higher income levels.

Anahtar Kelimeler

• Foreign direct investment
• Load capacity factor
• Pollution haven hypothesis
• Load capacity curve hypothesis
• Seemingly unrelated regression

Kaynakça

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