Author(s)

Symphorien Zogbassè¹, Ahouidji Tanguy Agbokpanzo¹, Kuessi Prince Houssou^1*, Tiburce André Agbidinoukoun², Alastaire Sèna Alinsato¹

¹Public Economics Laboratory (LEP), University of Abomey-Calavi (UAC), Abomey Calavi, Benin.
²Western Economy and Management Laboratory (LEGO), University of Western Brittany (UBO), Brest, France.

Air pollution is one of the crucial environmental challenges facing the countries of the Economic Community of West African States (ECOWAS). The objective of this paper is to examine the effect of an attractive tax policy on the relationship between Foreign Direct Investment (FDI) and air pollution in ECOWAS region over the period 2000 to 2019. By using the Ordinary Least Squares (OLS) method and panel data analyses (fixed effects and random effects), the results show that, in general, FDI does not have a significant effect on air pollution in the region. However, closer analysis reveals that an interaction between FDI and an attractive tax policy has a negative effect on air quality, leading to an increase in air pollution. Thus, companies attracted by tax incentives may not meet rigorous environmental standards. These results highlight the importance for policymakers to balance economic incentives with environmental protection in ECOWAS. Attractive tax policies can stimulate investment, but they must be designed in a way that encourages environmentally friendly practices, thereby helping to improve air quality in the region.

Air Pollution, Foreign Direct Investment, Attractive Tax Policy, Ordinary Least Squares, Rendom Effects

Zogbassè, S. , Agbokpanzo, A. , Houssou, K. , Agbidinoukoun, T. and Alinsato, A. (2023) The Effect of Foreign Direct Investment on Air Pollution in the Economic Community of West African States Region: What Influence Does Tax Expenditure Have?. Journal of Environmental Protection, 14, 903-918. doi: 10.4236/jep.2023.1411050.