Spatial Econometric Model Analysis of Foreign Direct Investment and Haze Pollution in China

Increasing attention is being paid to spatial distribution characteristics of haze pollution and its relation with socioeconomic factors. This study investigates the spatial autocorrelation of haze pollution in China and the effect of foreign direct investment (FDI) on haze pollution in China using a panel data of 31 provinces over the period 2000-12. Using a widely used spatial autocorrelation index, Moran’s I values, the estimation results suggest that haze pollution in China has strong spatial autocorrelation and spatial clustering phenomenon. Then, our analysis using spatial econometric models further confirms the significant spatial dependence and spatial spillover effects of haze pollution in China. Meanwhile, we also find a significantly positive relationship between FDI and haze pollution in China, in which an increase of 1% in FDI, haze pollution in China will increase by 0.0235%. Based on these results, we provide some important policy implications for the government to control haze pollution.