Foreign direct investment, economic growth and environmental quality in Africa: revisiting the pollution haven and environmental Kuznets curve hypotheses

Abstract

Purpose

This study examines the environmental effects of foreign direct investment (FDI) inflows and economic growth by revisiting the pollution haven and EKC hypotheses in the context of Africa.

Design/methodology/approach

The underlying relationships are unravelled with the help of quantile regressions for a panel of 46 African countries over the 1996–2022 period.

Findings

The results show that FDI inflows significantly increase CO2 emissions, supporting the pollution haven hypothesis (PHH) in Africa. There is also evidence of the N-shaped EKC hypothesis. When analysing different income groups, PHH and EKC remain consistent, except in low-income countries where only PHH is observed. However, the environmental impact of FDI inflows and economic growth decreases at higher quantiles. These findings suggest that policymakers in Africa should strengthen environmental regulations and adopt common environmental standards that encourage green technologies.

Originality/value

This study fills an empirical research gap by comprehensively examining the relationship between FDI, economic growth, and environmental degradation in African countries. Unlike previous studies focused on the inverted U-shaped EKC, our research reveals the existence of an N-shaped EKC in Africa.

Citation

Achuo, E. and Ojong, N. (2024), "Foreign direct investment, economic growth and environmental quality in Africa: revisiting the pollution haven and environmental Kuznets curve hypotheses", Journal of Economic Studies, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JES-02-2024-0065