The Threshold Effect of Foreign Direct Investment on Environmental Performance in MENA and OECD Countries (PSTR Approach)

Document Type : Research Paper

Authors

1 General Affairs Economics, Kharazmi University, Tehran, Iran

2 General Affairs Economics Department, Faculty of Economics, Kharazmi University, Tehran, Iran

3 Faculty of Economics, Kharazmi University, Tehran, Iran

Abstract

This study investigated the threshold effects of foreign direct investment, financial development, and social globalization on the Environmental Performance Index (EPI) in the Middle East and North Africa (MENA) and the member states of the Organization for Economic Co-operation and Development (OECD) over the period 1995–2023. The research applied a nonlinear analytical framework to capture potential threshold behaviors among the variables, considering the research design, statistical population and sample, sampling strategy, intervention variables, measurement instruments, and the analytical method without mentioning the name of the software used. The findings showed that in MENA countries, lower levels of FDI intensified environmental pressures, whereas after surpassing a specific threshold, FDI promoted cleaner technologies and improved environmental performance. Financial development also demonstrated a dual pattern, while social globalization enhanced environmental quality by increasing public awareness and societal pressure. In OECD countries, the effects of FDI were generally positive, supported by efficient financial systems and strong institutional structures, which amplified the favorable environmental impacts of economic and social integration. Overall, the study concluded that the environmental consequences of economic and social variables depended significantly on the level of economic development and institutional capacity across countries.

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Main Subjects

Journal of Environmental and Natural Resource Economics
Volume 5, Issue 12
January 2026

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History

  • Receive Date: 06 December 2025
  • Revise Date: 05 January 2026
  • Accept Date: 06 January 2026

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