FDI and Deforestation

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FDI and Deforestation

• Duncan Hobbs
• Ahmet Tarik Caskurlu
• Nazar Mohammed

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Introduction
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How Green Was My Valley
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Foreign Direct Investment

• Pre-Industrial Revolution
• Industrial Revolution
• Post-Industrial Revolution

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Independent and Dependent Variables

• Independent
• FDI inflows
• Dependent
• Net forest depletion

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Hypothesis
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(No Transcript)
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Background

• FDI conducive to economic growth
• Most common variables
• GDP/Cap, Population growth
• Different ways of deforestation measurement
• Opposition to FDI by environmentalists
• Fear of environmental regulations
• Kuznets curve-GDP per capita

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Methodology

• Variable Selection
• DV Net Forest Depletion
• IV Foreign Direct Investment
• 1) in inflation-adjusted USD
• 2) as a percentage of GDP
• Control Variables
• Only Developing Countries
• Years 1990-2012

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Malaysia Case

• Malaysia -India- Liberia

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FDI in USD Models
Simple OLS Multivariate OLS Country FE
net FDI inflows USD 0.00752 0.00678 -0.0141
Annual GDP Growth 7172881 1175291.7
GDP/Capita (USD) -3399960 16179.2
Agricultural Land ( of land area) 2721937 -393695.3
Observations 3014 1817 1817
Adjusted R2 0.017 0.094 0.11
" plt0.10 plt0.05 plt0.01"
Source FDINFD all countries.dta Source FDINFD all countries.dta Source FDINFD all countries.dta
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FDI GDP Models
Simple OLS Multivariate OLS Country FE
net FDI inflows GDP -3986879 -4537810 -0.0141
Annual GDP Growth 9175934 1175291.7
GDP/Capita (USD) -3044147 16179.2
Agricultural Land ( of land area) 2875613 -393695.3
Observations 2987 1817 1817
Adjusted R2 0.0024 0.090 0.102
" plt0.10 plt0.05 plt0.01"
Source FDINFD all countries.dta Source FDINFD all countries.dta Source FDINFD all countries.dta
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Limitations of study

• NFD observations coded as 0.
• Suspicious for Brazil, Indonesia, etc.
• Multiple Imputation?
• Inequality omitted
• FDI in USD not significant in Multi OLS model
• Fixed effect models lack significance

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0 NFD?
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Implications Future Work

• Marginal effect of FDI relatively small
• One penny of NFD per dollar of inflows
• Bigger domestic causes
• Potential Future Research
• New satellite data
• FDI inflows specific to forestry sector
• Region-specific analysis