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Will Fiscal Decentralization Influence FDI Inflows? A Spatial Study of Chinese Cities

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Listed:
  • Jing Wang
  • Wei Wei
  • HuiHui Deng
  • Yihua Yu

Abstract

Will fiscal decentralization policy impact Foreign Direct Investment (FDI) inflows in China? Will cities attract FDI at the expense of the environment? This study aims to answer these questions using China’s city-level data in 2014 and a spatial Durbin modelling approach. We find that: (1) Fiscal decentralization does promote FDI inflows; (2) FDI inflows show significant positive spatial agglomeration and spillover effects; (3) Lower environmental regulation stringency contributes to attracting FDI inflows and a stricter environmental regulation stringency in neighboring cities would impede local FDI inflows; (4) A lower level of environmental regulation stringency would, ceteris paribus, deteriorate fiscal decentralization’s stimulation on FDI inflows.

Suggested Citation

  • Jing Wang & Wei Wei & HuiHui Deng & Yihua Yu, 2017. "Will Fiscal Decentralization Influence FDI Inflows? A Spatial Study of Chinese Cities," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(9), pages 1988-2000, September.
    • Handle: RePEc:mes:emfitr:v:53:y:2017:i:9:p:1988-2000
    DOI: 10.1080/1540496X.2016.1266249
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    Cited by:

    1. Jie Zhang & Yinxiao Qu & Yun Zhang & Xiuzhen Li & Xiao Miao, 2019. "Effects of FDI on the Efficiency of Government Expenditure on Environmental Protection Under Fiscal Decentralization: A Spatial Econometric Analysis for China," IJERPH, MDPI, vol. 16(14), pages 1-19, July.
    2. Munther Al-Nimer & Salah Kayed & Rizwan Ullah & Najib Ullah Khan & Muhammad Sualeh Khattak, 2022. "Mapping the Research between Foreign Direct Investment and Environmental Concerns; Where Are We and Where to Go?," Sustainability, MDPI, vol. 14(24), pages 1-26, December.
    3. Yang, Xiaohui & Yan, Ji & Tian, Kun & Yu, Zihao & Yu Li, Rebecca & Xia, Senmao, 2021. "Centralization or decentralization? the impact of different distributions of authority on China's environmental regulation," Technological Forecasting and Social Change, Elsevier, vol. 173(C).

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