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Spatial Spillovers from Foreign Direct Investment: Evidence from the Yangtze River Delta in China

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  • Kiyoyasu Tanaka
  • Yoshihiro Hashiguchi

Abstract

This paper examines the spatial externality from foreign direct investment on domestic firms. Using Chinese firm-level data for 2004, and after accounting for an endogeneity problem, we find that foreign firms generate a significantly positive spillover effect on the regional productivity of domestic firms in similar counties and industries. Estimating a spatial-autoregressive model, we further show that such local spillovers could transmit to domestic firms in other counties and industries through interactions among domestic firms. However, these spatial multiplier effects decline with distance, thereby reducing the foreign direct investment spillover effects for domestic firms in distant locations.

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  • Kiyoyasu Tanaka & Yoshihiro Hashiguchi, 2015. "Spatial Spillovers from Foreign Direct Investment: Evidence from the Yangtze River Delta in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 23(2), pages 40-60, March.
    • Handle: RePEc:bla:chinae:v:23:y:2015:i:2:p:40-60
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    3. Mi Lin & Yum K. Kwan, 2017. "FDI Spatial Spillovers in China," The World Economy, Wiley Blackwell, vol. 40(8), pages 1514-1530, August.
    4. Shawn W. Tan & Dea Tusha, 2023. "Foreign firm characteristics, labour market restrictions and FDI spillovers: Evidence from Moldova," The World Economy, Wiley Blackwell, vol. 46(1), pages 85-119, January.
    5. Walheer, Barnabé & He, Ming, 2020. "Technical efficiency and technology gap of the manufacturing industry in China: Does firm ownership matter?," World Development, Elsevier, vol. 127(C).
    6. Lin, Mi & Kwan, Yum K., 2014. "FDI Spatial Spillovers in China," MPRA Paper 60754, University Library of Munich, Germany.
    7. Yiming Deng & Xiumin Li & Jianming Zhu, 2024. "Effect of Planning and Construction of Intercity Railways on the Economic Development of the Pearl River Delta Urban Agglomeration: An Analysis Based on the Spatial Durbin Model," Sustainability, MDPI, vol. 16(2), pages 1-19, January.
    8. Chunlai Chen, 2015. "Do Inland Provinces Benefit from Coastal Foreign Direct Investment in China?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 23(3), pages 22-41, May.
    9. Lin, Mi & Kwan, Yum K., 2016. "FDI technology spillovers, geography, and spatial diffusion," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 257-274.
    10. Wang, Jianda & Dong, Xiucheng & Dong, Kangyin, 2022. "How does ICT agglomeration affect carbon emissions? The case of Yangtze River Delta urban agglomeration in China," Energy Economics, Elsevier, vol. 111(C).

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