The moderating effect of foreign direct investment on environmental degradation-poverty reduction nexus: evidence from sub-Saharan African countries

This study examined the role played by foreign direct investment in environmental degradation-poverty reduction nexus using panel data from 39 sub-Saharan Africa countries. The study covered the period 1986-2018, while dynamic GMM was employed for the estimations. When poverty reduction was measured by household final consumption expenditure, it was found that the interaction between foreign direct investment and environmental degradation measures failed to contribute to poverty reduction. However, when poverty reduction was measured by the human development index, it was found that the interaction of foreign direct investment and environmental degradation enhanced poverty reduction. When poverty reduction was measured by life expectancy, the interaction term of FDI and carbon dioxide (CO2) was harmful to poverty reduction, while the interaction terms of FDI with other measures of environmental degradation had no effect on poverty reduction. The implications of the study were discussed.