The environmental footprint of international business in Africa; The role of natural resources

This paper examines whether the effect of foreign direct investment and trade on the environment differs be-tween natural and non-natural resource countries of Africa. We employ robust econometric modelings such as co -integration, Fully Modified Ordinary Least Square (FMOLS), and causality techniques on 46 African countries between 1985 and 2014. Consistent with the pollution halo hypothesis, we find that both foreign direct in-vestment and trade have a positive impact on non-natural resource-rich countries. On the contrary, in line with the pollution haven argument, we find that FDI and trade to natural resource-rich countries are associated with low environmental quality. Our results, therefore, suggest that non-natural resources-rich countries benefit from FDI and trade via technological transfer from developed countries.

Automated summary

This paper investigates whether the impact of foreign direct investment and trade on the environment varies between natural resource-rich countries and non-natural resource-rich countries in Africa. Using robust econometric models, we find that foreign direct investment and trade have a positive effect on non-natural resource-rich countries, supporting the pollution halo hypothesis. In contrast, foreign direct investment and trade are associated with lower environmental quality in natural resource-rich countries, supporting the pollution haven argument. These findings suggest that non-natural resource-rich countries benefit from technological transfer through foreign direct investment and trade.