Work

Foreign direct investments and CO2 emissions in Asia: A data-driven optimal transport perspective

Year: 2025

Type: article

Abstract: The environmental implications of Foreign Direct Investment (FDI) remain a topic of debate, with traditional models facing challenges in establishing a clear nexus between FDI and emissions. Against this background, we propose a novel, non-parametric approach based on Optimal Transport theory to examine the evolution of joint and conditional distributions of FDI and carbon emissions ( C O 2 ) across Asia. Leveraging satellite data, our method estimates optimal transport maps that represent the least costly way to transition between FDI and emissions distributions over time. We further construct one-period-ahead distributional forecasts using Wasserstein barycentric interpolation, ensuring minimal divergence from past observations. Our data-driven framework captures complex, nonlinear dependencies without imposing rigid parametric assumptions. The analysis reveals a positive relationship between FDI and C O 2 emissions, with aggregate forecasts indicating a generally increasing trend for both variables. However, distinct patterns emerge across selected countries, suggesting heterogeneous environmental impacts of FDI.

Source: Journal of Economic Behavior & Organization

DOI: 10.1016/j.jebo.2025.107318

Authors: Alessandro Spelta, Nicolò Pecora, Hung-Ju Chen

Institutions: University of Pavia, Università Cattolica del Sacro Cuore, National Taiwan University

Language: English

Topic: Energy, Environment, Economic Growth

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Climate action, Industry, innovation and infrastructure

Open Access status: hybrid

Estimated APC paid: $3,180