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Emigration and outward FDI in China: Key role of institutional quality

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  • Chen, Lin
  • Cheng, Chen

Abstract

Using the cross-sectional data of 111 destination countries related to China, this paper examines whether institutional quality matters for the nexus between Chinese emigration and outward foreign direct investment (FDI) in destination countries. The empirical results demonstrate that institutional quality amplifies the positive effect of Chinese emigration on outward FDI, even after accounting for potential endogeneity with an instrumental variable approach using the 2SLS estimation. Specifically, the political stability and absence of violence/terrorism, government effectiveness, the rule of law, and control of corruption will positively moderate the emigrate-FDI relationship.

Suggested Citation

  • Chen, Lin & Cheng, Chen, 2023. "Emigration and outward FDI in China: Key role of institutional quality," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322005992
    DOI: 10.1016/j.frl.2022.103422
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    More about this item

    Keywords

    Chinese emigration; Outward FDI; Institutional quality;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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