EFFECT OF FOREIGN DIRECT INVESTMENT ON ENVIRONMENTAL QUALITY IN WEST AFRICA

Abstract

The study empirically examines the impact of foreign direct investment (FDI) on environmental quality and tests the validity of the Pollution Haven Hypothesis in West Africa. The study uses annual panel data for 16 West African countries, spanning from 1996 to 2022. The study employs two estimation techniques (for robustness check), namely, panel-corrected standard errors (PCSE) and feasible generalized least squares (FGLS). The results reveal that FDI has a negative effect on West African environmental quality before the turning point; thus, after the threshold level, the effect changes positively. The results confirm the validity of the pollution haven hypothesis in West Africa. Based on the results, policymakers in the region should adopt threshold-based environmental policies, encourage sustainable economic growth, and strengthen monitoring and enforcement of environmental regulations