2 Environmental Impact of Foreign Direct Investment toward Host Countries

Accompany with the development of economy, the environment becomes deteriorating, especially in developing countries. Many studies found that foreign direct investment (FDI) with the effect of technology spillover would be one of the best ways to solve the environmental problem. By using the model of trade theory distinguishing between environmental and productive technology and separately analyzing the technology spillover effect of these two technologies on reducing environmental pollution in host countries, we find that the pollution problem could be worse if more intensive pollution industrial structure is induced by the environmental technology development. Naturally, this did not mean restraining the development of technology, but rather emphasizing the importance of the regulation and the industrial structure.