FDI spillover effects on sectoral green productivity in Taiwan

Area of Science:

• Environmental Economics
• Sustainable Development
• International Business

Background:

• Foreign direct investment (FDI) is a key driver of economic growth in emerging economies.
• Integrating environmental sustainability with economic growth models is a growing global priority.
• The impact of FDI on productivity via renewable energy adoption requires further investigation.

Purpose of the Study:

• To analyze the spillover effects of inward FDI (IFDI) and outward FDI (OFDI) on sectoral productivity in Taiwan.
• To examine the mediating role of IFDI and OFDI in the relationship between renewable energy consumption and productivity.
• To differentiate the impact of renewable energy versus nuclear energy on FDI-driven productivity.

Main Methods:

• Econometric analysis of sectoral productivity data in Taiwan from 1994-2022.
• Mediation analysis to assess the role of IFDI and OFDI.
• Focus on manufacturing, electricity and gas, and mining sectors.

Main Results:

• IFDI and OFDI significantly enhance productivity through increased per capita renewable energy consumption.
• Productivity gains observed: 3.19% in electricity/gas, 2.5% in manufacturing, 3.12% in mining per 1% increase in renewable energy.
• These effects were not observed for nuclear energy, highlighting the importance of specific energy sources.

Conclusions:

• FDI, particularly IFDI, facilitates green productivity gains through technology transfer and sustainable practices.
• OFDI contributes to productivity via a 'filter-out' mechanism, potentially related to environmental standards.
• Policy recommendations emphasize aligning FDI strategies with renewable energy deployment for sustainable economic growth.