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On the link between Japanese ODA and FDI in China: a microeconomic evaluation using conditional logit analysis

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  • Severine Blaise

Abstract

This study investigates the effectiveness of Japan's official development assistance in promoting foreign direct investments inflows in the case of the People's Republic of China. Conditional logit analysis using province level statistics from 1980 to 1999, shows that Japanese aid flows did have a significant positive impact on private investors location choice even though other profit-maximizing factors such as the level of economic activity had a leading spillover effect. In a context of growing scarcity of aid, the study concludes by asserting the importance of a complementary process in which foreign aid is aimed at enhancing the development of infrastructures, acting as a pre-requisite for future direct investments. Finally, Japan providing an interesting case study, we stress the need for a better cooperation between public and private sectors in development assistance programmes.

Suggested Citation

  • Severine Blaise, 2005. "On the link between Japanese ODA and FDI in China: a microeconomic evaluation using conditional logit analysis," Applied Economics, Taylor & Francis Journals, vol. 37(1), pages 51-55.
  • Handle: RePEc:taf:applec:v:37:y:2005:i:1:p:51-55
    DOI: 10.1080/0003684042000281534
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    References listed on IDEAS

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    1. Head, Keith & Ries, John & Swenson, Deborah, 1995. "Agglomeration benefits and location choice: Evidence from Japanese manufacturing investments in the United States," Journal of International Economics, Elsevier, vol. 38(3-4), pages 223-247, May.
    2. Urata, Shujiro & Kawai, Hiroki, 2000. "The Determinants of the Location of Foreign Direct Investment by Japanese Small and Medium-Sized Enterprises," Small Business Economics, Springer, vol. 15(2), pages 79-103, September.
    3. Belderbos, Rene & Carree, Martin, 2002. "The Location of Japanese Investments in China: Agglomeration Effects, Keiretsu, and Firm Heterogeneity," Journal of the Japanese and International Economies, Elsevier, vol. 16(2), pages 194-211, June.
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    Citations

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    Cited by:

    1. Jones, Yakama Manty, 2013. "Testing the foreign aid-led growth hypothesis in West Africa," MPRA Paper 50361, University Library of Munich, Germany.
    2. Selaya, Pablo & Sunesen, Eva Rytter, 2012. "Does Foreign Aid Increase Foreign Direct Investment?," World Development, Elsevier, vol. 40(11), pages 2155-2176.
    3. Gnangnon, Sèna Kimm & Roberts, Michael, 2015. "Aid for trade, foreign direct investment and export upgrading in recipient countries," WTO Staff Working Papers ERSD-2015-10, World Trade Organization (WTO), Economic Research and Statistics Division.
    4. María C. Latorre & Nobuhiro Hosoe, 2014. "How much can foreign multinationals affect the Chinese economy? A dynamic general equilibrium analysis of Japanese FDI," GRIPS Discussion Papers 14-16, National Graduate Institute for Policy Studies.
    5. Kimura, Hidemi & Todo, Yasuyuki, 2010. "Is Foreign Aid a Vanguard of Foreign Direct Investment? A Gravity-Equation Approach," World Development, Elsevier, vol. 38(4), pages 482-497, April.
    6. M. Ugur Karakaplan & Bilin Neyapti & Selin Sayek, 2005. "Aid and Foreign Direct Investment : International Evidence," Working Papers 0505, Department of Economics, Bilkent University.
    7. repec:wsi:jicepx:v:08:y:2017:i:02:n:s1793993317500107 is not listed on IDEAS
    8. Donaubauer, Julian & Herzer, Dierk & Nunnenkamp, Peter, 2012. "Does aid for education attract foreign investors? An empirical analysis for Latin America," Kiel Working Papers 1806, Kiel Institute for the World Economy (IfW).
    9. Annageldy Arazmuradov, 2012. "Foreign Aid, Foreign Direct Investment, and Domestic Investment Nexus in Landlocked Economies of Central Asia," Economic Research Guardian, Weissberg Publishing, vol. 2(1), pages 129-151, May.
    10. Kang, Sung Jin & Lee, Hongshik & Park, Bokyeong, 2011. "Does Korea follow Japan in foreign aid? Relationships between aid and foreign investment," Japan and the World Economy, Elsevier, vol. 23(1), pages 19-27, January.
    11. Latorre, María C. & Hosoe, Nobuhiro, 2016. "The role of Japanese FDI in China," Journal of Policy Modeling, Elsevier, vol. 38(2), pages 226-241.
    12. KIMURA Hidemi & TODO Yasuyuki, 2007. "Is Foreign Aid a Vanguard of FDI? A Gravity-Equation Approach," Discussion papers 07007, Research Institute of Economy, Trade and Industry (RIETI).
    13. repec:spr:manint:v:51:y:2011:i:3:d:10.1007_s11575-011-0078-z is not listed on IDEAS
    14. John C. Anyanwu, 2012. "Why Does Foreign Direct Investment Go Where It Goes?: New Evidence From African Countries," Annals of Economics and Finance, Society for AEF, vol. 13(2), pages 425-462, November.
    15. Yakama Manty Jones, 2013. "Testing the Foreign Aid-led Growth Hypothesis in West Africa," Management Working Papers 3, Birkbeck Department of Management, revised Apr 2013.
    16. repec:kap:asiapa:v:35:y:2018:i:1:d:10.1007_s10490-017-9514-3 is not listed on IDEAS
    17. Carro, Martha & Larrú, José María, 2010. "Flowing Together or Flowing Apart: An Analysis of the Relation between FDI and ODA Flows to Argentina and Brazil," MPRA Paper 25064, University Library of Munich, Germany.
    18. Brun, Jean-François & Gnangnon, Sèna Kimm, 2017. "Does trade openness contribute to driving financing flows for development?," WTO Staff Working Papers ERSD-2017-06, World Trade Organization (WTO), Economic Research and Statistics Division.
    19. repec:gam:jsusta:v:9:y:2017:i:12:p:2274-:d:122101 is not listed on IDEAS

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