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Governance Infrastructure and Location of Foreign Direct Investment in the People’s Republic of China

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  • He, Jia

    (Asian Development Bank Institute)

  • Rui, Oliver M.

    (Asian Development Bank Institute)

  • Zha, Xiaolei

    (Asian Development Bank Institute)

Abstract

In this study, using hand-collected data on FDI for more than 200 cities, the authors examine whether the Lucas paradox of capital exists within the PRC by adopting the dynamic panel data generalized method of moments (GMM) framework to avoid the potential endogeneity issue. Using both provincial- and city-level data, the empirical results show that FDI flows to the PRC, as proxied by total GDP and per capita GDP, favor rich regions over poor regions. They also find that regional economic growth has no significant impact on FDI. These findings support the existence of the Lucas paradox in the PRC.

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File URL: http://www.adbi.org/files/2011.11.23.wp324.governance.infrastructure.fdi.prc.pdf
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Bibliographic Info

Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 324.

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Length: 35 pages
Date of creation: 23 Nov 2011
Date of revision:
Handle: RePEc:ris:adbiwp:0324

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Related research

Keywords: lucas-paradox; foreign direct investment; generalized method of moments; province-city-samples; government policy;

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References

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  1. Steven Globerman & Daniel Shapiro, 2004. "Governance Infrastructure and U.S. Foreign Direct Investment," International Finance 0404008, EconWPA.
  2. Chakrabarti, Avik, 2001. "The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions," Kyklos, Wiley Blackwell, vol. 54(1), pages 89-113.
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  20. repec:fth:simfra:93-03 is not listed on IDEAS
  21. Gomme, P., 1993. "Money and Growth Revisited : Measuring the Costs of Inflation in an Endogenous Growth Model," Discussion Papers dp93-03, Department of Economics, Simon Fraser University.
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