Does the pollution haven hypothesis prevail in Turkey? Empirical evidence from nonlinear smooth transition models

Abstract

The pollution haven hypo thesis (PHH) postulates that foreign direct investment (FDI) inflows can increase environmental deterioration in developing countries as multinational firms tend to transfer their dirty industries to these countries. Turkey, as a developing economy, has witnessed intense FDI inflows over the last decades. Within this scope, the goal of this paper is to examine whether the pollution haven hypothesis (PHH) prevails in Turkey within the scope of the environmental Kuznets curve (EKC) hypothesis over the period 1970–2016. To that end, the paper employs unit root and cointegration methods based on the nonlinear smooth transition models. The empirical findings of the paper indicate that both hypotheses are valid in Turkey. The findings also imply that environmental quality in Turkey is negatively related to electricity production from renewable energy sources.