The main objective of this paper is to analyze the impacts of foreign direct investment (FDI) and trade openness (TO) on three main pillars of sustainable development (SD) consists of growth, income distribution, and environmental quality, for two selected countries which are South Korea and France. The observation of this study is based on annual data covering the period from 1980 to 2014. All the three proposed model are analyzed by using Autoregressive Distributed Lag (ARDL) estimation technique.The long run elasticities of ARDL model indicated that FDI inflows have led to higher growth and lower pollution level for South Korea, but have widened the income inequality in this country. The TO, on the other hand, has improved the income distribution but failed to have any significant effect on growth and environmental quality. As for France, FDI inflows were found to reduce income equality but have no significant impact on growth and environmental quality. As for TO, it was found to have a positive influence on growth. South Korea could offer more attractive incentives to foreign investors to invest more in both agricultural and manufacturing sectors besides improving the trade policies in order to sustain economic growth. France on the other hand, should be more selective especially allowing foreign industries that use cleaner energy in their production. Besides, France could adopt stricter environmental strategies in their trade agreements with other countries in order to ensure better protection for the environment.
Abdouli, M., & Hammami, S. (2016). Economic growth, FDI inflows and their impact on the environment: An empirical study of the MENA countries. Quality and Quantity, 50(216), 1-26.
Arora, R.U. (2012). Finance and inequality: A study of Indian states. Applied Economics, 44, 4527–4538.
Barro, R., & Lee, J.W. (2011). Educational attainment dataset. Available at:
[Accessed 4 Jan 2016]
Belloumi, M. (2014). The relationship between trade, FDI and economic growth in Tunisia: An application of
the autoregressive distributed lag model. Economic Systems, 38(2), 269–287.
Canavire-Bacarreza, G., & Rioja, F. (2009). Financial development and the distribution of income in Latin America and the Caribbean. Well-Being and Social Policy, 5, 1–18.
Çelik, S., & Basdas, U. (2010). How does globalization affect income inequality? A panel data analysis. International Advances in Economic Research, 16(4), 358–370.
Cole, M.A., Rayner, A.J., & Bates, J.M. (1997). The environmental Kuznets curve: An empirical analysis.
Environment and Development Economics, 2, 401–416.
CO2 time series 1990-2014 per region/country dataset, (2015). Emissions Database for Global Atmospheric
Research [online]. Available at: http://edgar.jrc.ec.europa.eu/overview.php?v=CO2ts1990-2014 [Accessed 2 Jan 2016]
Frank, A.G. (1978). Dependent accumulation and underdevelopment. New York: Monthly Review Press.
Grossman, G.M., & Kruger, A.B. (1995). Economic growth and the environment. Quarterly Journal of Economics, 110, 353-377.
Income Inequality dataset, (2015). Global Consumption and Income Project. [online] Available
at: [Accessed 12 February 2016].
International Labor dataset, (2015). International Labor Organization. [online] Available at:[Accessed 26 February 2016]
Klasra, M.A. (2011). Foreign direct investment, trade openness and economic growth in Pakistan and Turkey:
An investigation using bounds test. Quality and Quantity, 45, 223–231.
Krueger, A.O. (1978). Foreign trade regimes and economic development: Liberalization attempts and consequences. Lexington, MA: Ballinger Press.
Lee, W.J. (2013). The contribution of foreign direct investment to clean energy use, carbon emission and
economic growth. Energy Policy, 55, 483-489.
Levine, R. (1997). Financial development and economic growth: Views and agenda. Journal of Economic
Literature, 35, 688–726.
Mah, J.S. (2003). A note on globalization and income distribution - The case of Korea. Journal of Asian Economics, 14(1), 161–168.
Mushtaq, M., Ahmad, K., Ahmed, S., & Nadeem, M. (2014). Impact of FDI on income distribution in selected
SAARC countries. Journal of Applied Environmental and Biological Science, 4, 1–10.
Narayan, P.K. (2004). Reformulating critical values for the bound F- statistic: approach to cointegration: An
application to the tourism demand model for Fiji. Discussion Paper, Monash University, Australia
Rostow, W.W. (1960). The stages of economic growth: A non-communistic manifesto. Cambridge University Press.
Sato, S., & Fukushige, M. (2009). Globalization and economic inequality in the short and long run: The case
of South Korea 1975 – 1995. Journal of Asian Economics, 20, 62–8.
Shahbaz, M. & Rahman, M.M. (2010). Foreign capital inflows-growth nexus and role of domestic financial sector: An ARDL co-integration approach for Pakistan. Journal of Economic Research, 15, 207-31.
Shahbaz, M., Hye, Q.M.A., Tiwari, A. K., & Leitão, N.C. (2013). Economic growth, energy consumption, financial development, international trade and CO2 emissions in Indonesia. Renewable and Sustainable Energy Reviews, 25, 109–121.
Stretesky, P.B., & Lynch, M.J. (2008). A cross-national study of the association between per capita carbon dioxide emissions and exports to the United States. Journal of Social Science Resources, 38, 239–250.
Sylwester, K. (2005). Foreign direct investment, growth, and income inequality in less developed countries. International Review of Applied Economics, 19(3), 289-300.
Solarin, S.A., & Shahbaz, M. (2015). Natural gas consumption and economic growth: The role of foreign direct
investment, capital formation and trade openness in Malaysia. Renewable Sustainable Energy Review, 42, 835–845.
Tamazian A., & Rao, B.B. (2010). Do economic, financial and institutional developments matter for environmental degradation? Evidence from transitional economies. Energy Economics, 32, 137–45.
Wu, J.Y., & Hsu, C.C. (2012). Foreign direct investment and income inequality: Does the relationship vary with
absorptive capacity? Economic Modelling, 29(6), 2183–2189.
World Bank. (2016). World Development Indicators. [online] Available at: [Accessed 2 April 2015].
World Commission on Environment and Development. (1987). Our Common Future (The Brundtland Report), Oxford University Press, Oxford.
Ridzuan, A. R., Ismail, N. A., Hamat, A. F. C., Razak, M. I. M., & Pardi, F. (2017). The Impact of Foreign Direct Investment and Trade Liberalization on Economic Growth, Income Distribution and Environmental Quality: The Comparative Analysis between France and South Korea. International Journal of Academic Research in Business and Social Sciences, 7(6), 140-158.
Copyright: © 2017 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode
