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This chapter investigates the environmental effects of FDI and democracy using a panel dataset of 160 countries for the period from 1980 to 2021. It also examines the marginal effects of FDI at the mean and various percentile values of the composite democracy indicator. The findings demonstrate that FDI significantly reduces environmental emissions as countries increase their level of democracy. Evidence shows that the interaction between FDI and democracy leads to the pollution halo hypothesis. The mitigation effect is larger in countries that present higher levels of democracy and attract more FDI.

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Exploring the Relationship Between Democracy and the Environment: The Moderating Role of FDI

  • 章节

  • 发表日期：

    2025年

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  • João Bento,
  • Miguel M. Torres

摘要

This chapter investigates the environmental effects of FDI and democracy using a panel dataset of 160 countries for the period from 1980 to 2021. It also examines the marginal effects of FDI at the mean and various percentile values of the composite democracy indicator. The findings demonstrate that FDI significantly reduces environmental emissions as countries increase their level of democracy. Evidence shows that the interaction between FDI and democracy leads to the pollution halo hypothesis. The mitigation effect is larger in countries that present higher levels of democracy and attract more FDI.