The effect of service FDI on carbon productivity in China: a multidimensional heterogeneity perspective

ABSTRACT

Effect of foreign direct investment (FDI) in services on carbon productivity is examined based on Chinese province-level panel data from 2007 to 2019. We control for income level, technical level and sectoral differences and find (ⅰ) in the full sample, service FDI has no significant effect on carbon productivity; (ⅱ) the effect of income inequality: service FDI flowing into high-income regions benefits the environment, while flows to low-income regions do not support the pollution-halo effect; (ⅲ) the effect of technology inequality: service FDI in regions with high technology levels reduces the carbon emission, while the environmental effect of service FDI is insignificant in low-technology regions; (ⅳ) industrial heterogeneity: FDI inflows to different sectors show different sensitivities to income level and have different impacts on carbon productivity. The result has a strong policy implication which will be helpful for the local governments to make policies with the aim to maximize the benefit from the pollution-halo effect of service FDI.

KEYWORDS:

• Carbon productivity
• pollution-halo effect
• pollution-haven effect
• threshold effect
• service FDI

JEL CODES:

• F18
• F20

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This research is financially supported by the National Key R&D Program of China [No. 2019YFB1405500].