Foreign Direct Investment and the Environment: A Cross‐National Analysis of Carbon Dioxide Emissions Per Capita, 1980–20181

Social scientists have long debated the environmental impacts of foreign direct investment (FDI). This research empirically evaluates the competing theoretical expectations of neoclassical economic theory and FDI dependency theory regarding the FDI and carbon dioxide emissions per capita relationship. Results from fixed effects panel regression models indicate that inward FDI stocks in all economic sectors exert a beneficial effect on carbon dioxide emissions per capita in analyses of developed countries, developing countries, and in a global sample of countries. I thus consistently find empirical support for neoclassical economic theory. This research contributes to an emerging body of scholarship finding that foreign capital penetration—in some cases—produces beneficial effects.