FDI AND DEFORESTATION Duncan Hobbs Ahmet Caskurlu Nazar Mohammed

Introduction

How Green Was My Valley…

Foreign Direct Investment Pre-Industrial Revolution Industrial Revolution Post-Industrial Revolution

Independent and Dependent Variables Independent FDI inflows Dependent Net forest depletion

Hypothesis FDI INFLOWS FOREST DEPLETION

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

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 from

Malaysia Case Malaysia -India- Liberia

FDI % GDP Models Simple OLSMultivariate OLSCountry FE net FDI inflows %GDP *** *** Annual GDP Growth *** * GDP/Capita (USD) *** Agricultural Land (% of land area) *** Observations Adjusted R^ "* p<0.10 ** p<0.05 *** p<0.01" Source FDI&NFD all countries.dta

FDI in USD Models Simple OLSMultivariate OLSCountry FE net FDI inflows USD *** Annual GDP Growth *** * GDP/Capita (USD) *** Agricultural Land (% of land area) *** Observations Adjusted R^ "* p<0.10 ** p<0.05 *** p<0.01" Source FDI&NFD all countries.dta

Limitations of study NFD observations coded as 0. Suspicious for some nations e.g. Brazil. Can’t necessarily fix with MI methods. Lack of good inequality data. FDI in USD not significant in Multi OLS model. Fixed effect models lack significance.

0 NFD?

Implications & Future Work Marginal effect of FDI is relatively small. About one penny of NFD per dollar of inflows. Need to focus on domestic problems. Potential Future Research New satellite data to analyze deforestation. FDI inflows specific to forestry sector. Region-specific analysis.