What is Bio-Capacity

The factors affecting environmental quality are examined in this chapter. Along with the support of relevant literature, Environmental Kuznets Curve (EKC) hypothesis is explained in detail to examine the impact of economic growth. In order to understand the linkage between foreign direct investments (FDI) and environmental degradation, pollution haven hypothesis (PHH) and pollution halo hypothesis (P-HH) are scrutinized. Using data of Sweden for the period 1971-2015, impacts of economic growth, FDI inflows, and energy consumption on the ecological footprint are measured. Results show that there exists a U-shaped relationship between gross domestic product per capita and ecological footprint. In the long run, the EKC hypothesis is contradicted. Additionally, FDI inflows are found to affect ecological footprint negatively, meaning that it decreases the environmental deterioration, in the long run, affirming P-HH. This study could be extended by using different econometric models, countries, and larger datasets.