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Hard Or Soft? Institutional Reforms And Infrastructure Spending As Determinants Of Foreign Direct Investment In China

  • K. C. FUNG

In this paper, we examine whether hard infrastructure in the form of more highways and railroads or soft infrastructure in the form of more transparent institutions and deeper reforms lead to more foreign direct investment (FDI). We use data of FDI from the United States, Japan, Hong Kong, Taiwan and Korea to various regions of China from 1990 to 2002. We control for the standard determinants of FDI--regional market sizes, wage rates, human capital and tax policies. Then we add indices of hard and soft infrastructures. We found that empirically soft infrastructure consistently outperforms hard infrastructure as a determinant of FDI.

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Article provided by Japanese Economic Association in its journal Japanese Economic Review.

Volume (Year): 56 (2005)
Issue (Month): 4 ()
Pages: 408-416

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Handle: RePEc:bla:jecrev:v:56:y:2005:i:4:p:408-416
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  1. Chantasasawat, Busakorn & Fung, K. C. & Iizaka, Hitomi & Siu, Alan, 2004. "The Giant Sucking Sound: Is China Diverting Foreign Direct Investments from Other Asian Economies?," Santa Cruz Center for International Economics, Working Paper Series qt74s1m5g4, Center for International Economics, UC Santa Cruz.
  2. K. C. Fung & Alicia Garcia-Herrero & Hitomi Iizaka & Alan Siu, 2005. "Hard Or Soft? Institutional Reforms And Infrastructure Spending As Determinants Of Foreign Direct Investment In China," The Japanese Economic Review, Japanese Economic Association, vol. 56(4), pages 408-416.
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