Economic Research and Perspectives

Economic Research and Perspectives

FDI as a Determinant of Sustainable Development in Developing Countries and Emerging Countries

Document Type : Original Research

Authors
Zahra Zamani 1
Seyed Komeil Tayebi 2
1 Ph.D. in Economics, Post-doc Researcher, granted by Iran National Science Foundation (No. 95002939) and University of Isfahan, Department of Economics, Isfahan, Iran
2 Professor of International Economics, Director of the Center of Excellence for International Economics, Department of Economics, University of Isfahan, Isfahan, Iran
Abstract
Due to the fundamental differences in technology, factor abundance, labor productivity and economic capacities, developing countries need to attract FDI in order to achieve sustainable development goals. FDI transfers a variety of spillover effects including advanced technology, modern management and productive capital which properly help saving and promoting the environment. Indeed, FDI develops economic potentials of developing countries to expand export markets and to participate in the global economy, a fact that quantitative values lead to qualitative ones. Now, the question arises whether attracting any kind of FDI by emerging and developing economies leads to high-value employment opportunities, or preserves the environment. Do sustainable FDI flows secure sustainable development goals in developing countries? The basic hypothesis of this study is based on assessing the validity of this claim, subject to being empirically tested. This study investigates the effect of FDI on the sustainable development process in selected developing economies by using a panel data model over the period 2000-2018. The results indicate the significant effect of FDI and its spillover on sustainable development of selected countries. However, environmental pollution has statistically a negative and significant effect on sustainable development in these countries. The negative interaction effect of FDI and carbon dioxide emission on sustainable development indicates that if FDI triggers environmental pollution in host countries, it will hinders the path to sustainable development.
Keywords
Foreign Direct Investment (FDI)
sustainable development
Spillovers
Developing Countries
Emerging Countries

Subjects

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Economic Research and Perspectives
Volume 20, Issue 4
Winter 2021
Pages 33-65