What Determines Inward FDI in China? --An empirical study using firm-level data
AbstractUsing firm-level data from an Enterprise Survey of World Bank, this paper is designed to test how policy variables can affect inward foreign direct investment ("FDI") in China. After excluding the problems of sample selection and endogeneity, the result shows that investment promotion agencies (IPAs) and investment incentive zones (IIZs) have significant positive effect on absorbing FDI in China. Other factors such as sales volume and R&D also have significant impact. I also found that both IPAs and IIZs play a more important role in inviting other foreign companies to come to China than they do to Hong Kong, Macau, and Taiwan ("HMT") enterprises. The last finding is that if the city has IPA only, its promotion effect actually outweighs the city with IPA or IIZ combined; on the other hand, if the city has IPA or IIZ, then its positive effect on absorbing FDI will be larger than the city with IIZ solely.
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Bibliographic InfoPaper provided by Osaka School of International Public Policy, Osaka University in its series OSIPP Discussion Paper with number 13E004.
Length: 33 pages
Date of creation: Apr 2013
Date of revision:
Investment promotion agency; firm-level data; sample selection; China;
Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-20 (All new papers)
- NEP-CSE-2013-04-20 (Economics of Strategic Management)
- NEP-DEV-2013-04-20 (Development)
- NEP-TRA-2013-04-20 (Transition Economics)
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