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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.

Suggested Citation

  • 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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    File URL: http://hdl.handle.net/10.1111/cwe.12106
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. repec:bla:worlde:v:40:y:2017:i:8:p:1514-1530 is not listed on IDEAS
    3. Lin, Mi & Kwan, Yum K., 2014. "FDI Spatial Spillovers in China," MPRA Paper 60754, University Library of Munich, Germany.
    4. 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.
    5. Latorre, María C. & Hosoe, Nobuhiro, 2016. "The role of Japanese FDI in China," Journal of Policy Modeling, Elsevier, vol. 38(2), pages 226-241.

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