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Is FDI into China Crowding Out the FDI into the European Union?

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Author Info

  • Laura Resmini

    (University of Valle d'Aosta, Aosta, and ISLA)

  • Iulia Siedschlag

    (Economic and Social Research Institute (ESRI))

Abstract

We estimate an augmented gravity model to analyse the effects of FDI into China originating in OECD countries on FDI into EU and other countries over the period 1990-2004. Our results suggest that on average, ceteris paribus, over the analysed period, FDI inflows into China have been complementary to FDI inflows into EU15 countries but they have substituted FDI into the new EU countries in Central and Eastern Europe. In particular, small economies such as Bulgaria and the Baltic countries have been affected negatively by the surge in the FDI into China. This FDI diversion appears in the case of efficiency-seeking FDI.

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File URL: http://www.esri.ie/UserFiles/publications/20080331103552/WP231.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number WP231.

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Length: 27 pages
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:esr:wpaper:wp231

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Keywords: Foreign direct investment; China; European Union;

This paper has been announced in the following NEP Reports:

References

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  1. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
  2. Eswar Prasad & Shang-Jin Wei, 2005. "The Chinese Approach to Capital Inflows: Patterns and Possible Explanations," NBER Working Papers 11306, National Bureau of Economic Research, Inc.
  3. Agnès Bénassy-Quéré & Maylis Coupet & Thierry Mayer, 2005. "Institutional Determinants of Foreign Direct Investment," Working Papers 2005-05, CEPII research center.
  4. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  5. Scott L. Baier & Jeffrey H. Bergstrand, 2005. "Do free trade agreements actually increase members’ international trade?," Working Paper 2005-03, Federal Reserve Bank of Atlanta.
  6. Stein, Ernesto & Daude, Christian, 2007. "Longitude matters: Time zones and the location of foreign direct investment," Journal of International Economics, Elsevier, vol. 71(1), pages 96-112, March.
  7. Karolina Ekholm,, . "Factor Endowments and the Pattern of Affiliate Production by Multinational Enterprises," Discussion Papers 97/19, University of Nottingham, CREDIT.
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Cited by:
  1. Frank Barry & Adele Bergin, 2010. "Ireland’s Inward FDI over the Recession and Beyond," The Institute for International Integration Studies Discussion Paper Series iiisdp321, IIIS.

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