Foreign Direct Investment and Ecological Efficiency in Kenya

This study examines the effect of foreign direct investment on ecological efficiency in Kenya․ Drawing on the annual time series data covering 1990 through 2021‚ it evaluates whether foreign direct investment has led to ecological efficiency or is causing ecological pressure in the developing economy․ Ecological efficiency‚ which includes economic performance and resource use‚ was used as an aggregated indicator of environmental sustainability‚ using secondary data from the United Nations Conference on Trade and Development (UNCTAD)‚ the World Bank's World Development Indicators, and the Global Footprint Network․ The Autoregressive Distributed Lag (ARDL) model estimated short-run and long-run relationships between ecological efficiency‚ FDI‚ economic growth‚ renewable energy consumption and financial development‚ establishing the existence of a long-run equilibrium relationship between the variables․ The negative and statistically significant long-run relationship between FDI and ecological efficiency supported the Pollution Haven Hypothesis․ Economic growth positively influenced ecological efficiency indicators․ Inversely‚ renewable energy consumption and financial development negatively impacted ecological efficiency in the long term․ These results imply that FDI should be supported by stronger environmental regulation‚ implementation of existing institutional frameworks‚ and incentives to adopt cleaner production techniques in order to promote sustainable development.