Testing the Role of Vertical Intra-Industry Trade and Bilateral FDI on CO2 Emissions in Pakistan

Authors

  • Fareeha International Institute of Islamic Economics, International Islamic University, Islamabad, Pakistan.
  • Babar Hussain International Institute of Islamic Economics, International Islamic University, Islamabad, Pakistan.
  • Umbreen Zahra International Institute of Islamic Economics, International Islamic University, Islamabad, Pakistan.

DOI:

https://doi.org/10.56536/ijmres.v12i3.251

Keywords:

CO2 emission, vertical intra-industry trade, bilateral FDI, energy consumption

Abstract

Environmental pollution is the key concern of today’s world. Being a developing country, Pakistan is not exempted from world pollution as carbon dioxide emissions are increasing continuously. This study empirically investigates the factors effecting CO2 emissions focusing on the role of vertical intra-industry trade and Bilateral FDI of USA, UK and China with Pakistan from 1981 to 2018. ARDL bounds testing method is used to investigate long run relationship among the variables of interest. The vertical intra-industry trade is calculated by using the threshold method. The stationary properties of the variables are examined by applying the Augmented Dicky-Fuller and Phillip Peron unit root test. Robust OLS regression is analyzed for the model of USA and Pakistan. Results indicate a positive impact of bilateral FDI with USA but it is insignificant for UK and China. Energy use and Real GDP are significantly positive.  Conversely, vertical intra-industry trade is negative for USA and positive for China. These overall findings validate the pollution haven hypothesis in Pakistan and also confirm the Environment Kuznets Curve (EKC) hypothesis. The government should impose adequate environmental policy for all the multinational corporation (MNC’s) on equivalent basis.

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Published

2022-10-10

How to Cite

Fareeha, Babar Hussain, & Zahra, U. (2022). Testing the Role of Vertical Intra-Industry Trade and Bilateral FDI on CO2 Emissions in Pakistan. International Journal of Management Research and Emerging Sciences, 12(3). https://doi.org/10.56536/ijmres.v12i3.251