Foreign Direct Investment, Economic Growth, and Environmental Degradation in Indonesia: Evidence from Ecological Footprint Data

This study investigates the effects of foreign direct investment (FDI), economic growth, and population growth on environmental degradation in Indonesia over the period 1972–2022. Environmental degradation is proxied by the ecological footprint, which captures comprehensive pressure on natural resources. Using annual time-series data employing the Autoregressive Distributed Lag (ARDL) bounds testing approach, the empirical results reveal that FDI has a positive and statistically significant impact on the ecological footprint, thereby supporting the Pollution Haven Hypothesis. Economic growth exhibits a positive but statistically insignificant effect, indicating that economic expansion alone does not necessarily exacerbate environmental pressure. In contrast, population growth shows a negative and statistically significant relationship with environmental degradation, suggesting improvements in resource efficiency, urbanization dynamics, and environmental awareness over time. Overall, the findings underscore the importance of strengthening environmental regulations within investment policies and promoting sustainable development strategies to mitigate environmental degradation in developing economies such as Indonesia. This study contributes to the literature by providing long-run and short-run evidence on the FDI–environment nexus in Indonesia using ecological footprint data over a long historical period.