Can governance moderate FDI inflows to convert the pollution haven to a halo? Revisiting the BRICS context using the panel ARDL approach

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  By Rupamanjari Sinha Ray
  Associate Professor

  Co-Authors
  Rimpa Chanda, West Bengal State University, Berunanpukuriya, West Bengal, India
  Chandralekha Ghosha , West Bengal State University, Berunanpukuriya, West Bengal, India
  

  Journal : Applied Economics
  Publisher : Taylor & Francis Online

Article citation: Chanda, R., Ghosh, C., & Sinha Ray, R. (2025). Can governance moderate FDI inflows to convert the pollution haven to a halo? Revisiting the BRICS context using the panel ARDL approach. Applied Economics. Advance online publication.

Abstract

The article explores a tripartite framework comprising the Environmental Kuznets Curve, the pollution haven or halo hypotheses, and the Porter hypothesis with a specific focus on governance within the context of five BRICS nations. The study utilizes a panel ARDL model, which analyzes a dataset from 2000 to 2019 and incorporates a composite governance index derived from the Worldwide Governance Indicators. Results confirm the presence of an inverted U-shaped Environmental Kuznets Curve in the long run. Furthermore, trade openness is reported to increase carbon emissions in the long run, supporting the pollution haven hypothesis, while foreign direct investment exerts a statistically significant negative long-run effect on emissions, corroborating the pollution halo hypothesis. Distinctively, the study underscores how effective governance may moderate the relationship between FDI and carbon dioxide emissions, particularly through promoting renewable energy consumption. The article also reports pertinent governance-centric policy implications for emission reduction in BRICS countries.