Essays on the Impact of Globalisation on Environmental Quality

This thesis explores the relationship between globalisation and the environment through a systematic review and three empirical studies, applying advanced econometric techniques to better understand how environmental degradation is influenced by trade openness and foreign direct investment (FDI).The first study systematically reviews existing literature on the nexus between FDI, trade, and environmental degradation, employing the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) methodology to identify and analyse relevant studies published between 2018 and the first quarter of 2024. The review reveals that the environmental effects of trade and FDI are highly context-dependent and mixed; sometimes positive and other times negative depending on national policies, regulatory frameworks, and levels of development. We also found a significant geographical imbalance in the existing body of research. Only a limited proportion focus on Africa, while Asia and other global regions account for 33.75% and 39.38% as the context of relevant studies respectively. Moreover, 68.75% of the reviewed studies on the trade/FDI-environmental efficiency nexus are on Asia, further underscoring a critical research gap in the African region. Notably, African contexts remain underexplored, particularly in relation to indigenous knowledge systems and their role in shaping environmental outcomes. This study, therefore, highlights the urgent need for context-specific empirical work that considers Africa’s unique socio-economic and environmental dynamics.The second study addresses this gap by empirically examining the environmental effects of sectoral trade and local (indigenous) knowledge in African countries. The findings show that service exports are associated with a significant reduction in environmental degradation, while service imports have an insignificant effect. Greater trade openness in services is found to be environmentally beneficial. In contrast, trade in goods yields mixed results: goods exports tend to worsen environmental outcomes, whereas goods imports are associated with improvements. Moreover, trade openness in goods correlates with higher environmental degradation. A more granular analysis of intra-industry trade reveals that service-based trade enhances environmental quality, while trade in production goods exacerbates degradation. Sectoral disaggregation shows that agricultural trade openness contributes to environmental improvement, whereas openness in manufacturing and financial services is linked to worsening environmental outcomes. Importantly, the integration of local knowledge systems plays a pivotal role in mitigating environmental degradation.The third empirical study contributes to the literature by investigating the environmental impacts of FDI into the key sectors of agriculture, manufacturing, and services, alongside sustainable FDI practices in Africa. The findings indicate that environmental regulations are crucial in facilitating the positive effects of FDI on environmental quality, particularly in the agricultural and manufacturing sectors. Sustainable FDI, particularly in the form of greenfield and brownfield investment, is found to yield immediate environmental benefits, while FDI only generates positive outcomes when accompanied by robust regulatory frameworks. However, FDI into the service sector appears to have a negative impact on environmental sustainability. These results underline the importance of sector-specific FDI policies and the need for strong environmental governance to ensure that FDI contributes to sustainable development across Africa.The fourth and final study assesses the extent to which environmental efficiency spillovers from major economies, specifically China and the United States via FDI, and how imports are influenced by domestic environmental capabilities and social capital within African countries. The results demonstrate that countries with lower domestic environmental efficiency benefit most from cross-border efficiency gains. Moreover, nations with stronger social capabilities, such as a more educated workforce and higher institutional quality, are better positioned to absorb and benefit from these spillovers. The study also finds that FDI from China and the USA tends to favour politically stable and economically advanced African nations. These findings reinforce the importance of investing in human capital and institutional development, while also fostering greater regional cooperation, to enhance environmental efficiency and resilience across the continent.Together, these studies offer new empirical insights into how globalisation, when carefully managed and supported by local institutions and knowledge, can play a constructive role in promoting environmental sustainability in Africa.