Institutions' role in foreign direct investment, urbanization, environmental performance and energy consumption in developing economies

The first objective of this study examines how institutional quality complement FDI in enhancing environment performance in the top ten host countries of FDI in Africa. Based on the Dynamic Common Correlated Effect estimation techniques and data over the 1996-2021 period, the following results were established; First, the results of non-interactive regression validate the pollution haven hypothesis but invalidate the inverted Environmental Kuznets Curve (EKC) U-shaped relationship between FDI and environment performance. It also confirms the EKC N-shaped relationship between FDI and environmental performance. Secondly, the interactive result reveals that the interaction between FDI and institutional quality plays a crucial role in enhancing environmental performance, thereby emphasizing the importance of strong institutions in mitigating the negative effect of FDI on environmental performance. The second objective of the thesis explores the effect of urbanization on environmental performance in a panel of the top ten urbanized countries in Africa, with a special emphasis on the role of corruption control over the 1996-2021 period. The result of the Dynamic Common Correlated Effect revealed that urbanization has a negative effect on environmental performance both in the short-run and long-run. However, with the interactive relationship between control of corruption and urbanization, it turns out to be positive. This indicates that the positive effects of urbanization on the environment hinge significantly upon the implementation of more effective measures to control and mitigate corruption. The third objective of the study examines the moderating effect of institutional quality in FDI and energy consumption relationship among the top ten FDI host countries in Africa spanning from 1996 to 2021. The Dynamic ARDL simulation techniques was employed for the estimation techniques while the Kernel-based Regularized Least Squares (KRLS) machine learning method was employed for robustness test. The result revealed heterogeneous impacts of FDI on energy consumption among the selected African countries, with varying effects observed in both the short and long run. More importantly, it was also found that the interactive relationship between FDI and institutional quality reduces energy consumption in all the selected countries. The implication of these findings indicates that while the benefits of FDI and urbanization are indisputable, they cannot be realized without the appropriate institutional framework. Hence, the host country's institutional quality is pivotal in maximizing the absorptive capacity of FDI and urbanization to promote environmental sustainability, effectively reduce energy consumption, and facilitate the adoption of energy-saving technologies

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