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Bilateral Rent‐Seeking And Growth Of Fdi Inflow In China: Theory And Evidence

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  • Shu Keng
  • Chien‐Chiang Lee
  • Weiping Li
  • Jim Huangnan Shen

Abstract

This research proposes a new theory called bilateral rent‐seeking to explain the dramatic growth of foreign direct investment (FDI) inflow into China over the past several decades. We construct a Nash bargaining model to illustrate the relevance of how the reciprocal relationship between the local state and foreign investors leads to the greater incentives for the latter to invest in the local market, thus resulting into the huge FDI inflows into the domestic market in China in the past several decades. The empirically evidence presented in the end is broadly consistent with the theories proposed in this paper (JEL D21, D72, L52)

Suggested Citation

  • Shu Keng & Chien‐Chiang Lee & Weiping Li & Jim Huangnan Shen, 2020. "Bilateral Rent‐Seeking And Growth Of Fdi Inflow In China: Theory And Evidence," Contemporary Economic Policy, Western Economic Association International, vol. 38(2), pages 359-379, April.
    • Handle: RePEc:bla:coecpo:v:38:y:2020:i:2:p:359-379
    DOI: 10.1111/coep.12459
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    Cited by:

    1. Jim Huangnan Shen & Luyao Zhang & Chien‐Chiang Lee & Jun Zhang & Leilei Shen, 2021. "Towards a dynamic model of the industrial upgrading with global value chains," The World Economy, Wiley Blackwell, vol. 44(9), pages 2683-2702, September.
    2. Jim Huangnan Shen & Weiping Li & Chien‐Chiang Lee, 2023. "Unlocking the myths of size expansion in China's large state‐owned enterprises: Theory and evidence," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1264-1284, March.
    3. Lv, Chengchao & Shao, Changhua & Lee, Chien-Chiang, 2021. "Green technology innovation and financial development: Do environmental regulation and innovation output matter?," Energy Economics, Elsevier, vol. 98(C).
    4. Mou, Ying-Ge & Ma, Mengjuan & chen, Qian, 2022. "Measuring the role of consuming natural resource domination and social media for green economic recovery," Resources Policy, Elsevier, vol. 79(C).

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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