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Corruption, Governance and FDI Location in China: A Province-Level Analysis

  • Matthew Cole
  • Robert Elliott
  • Jing Zhang

China's recent rapid growth has been matched by large increases in exports and foreign direct investment (FDI), but considerable regional disparities in FDI flows exist. We use detailed province level data for China to examine the determinants of intra-country FDI flows. Specifically, we investigate whether FDI is attracted to those regions that exhibit good governance and are most strongly engaged in the fight against corruption, constructing proxies for provincial government efficiency and anti-corruption effort. Our regression results confirm that FDI is attracted to provinces with relatively high levels of government efficiency and are actively involved in the fight against corruption.

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Article provided by Taylor & Francis Journals in its journal Journal of Development Studies.

Volume (Year): 45 (2009)
Issue (Month): 9 ()
Pages: 1494-1512

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Handle: RePEc:taf:jdevst:v:45:y:2009:i:9:p:1494-1512
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  7. Miriam A. Golden & Lucio Picci, 2005. "Proposal For A New Measure Of Corruption, Illustrated With Italian Data," Economics and Politics, Wiley Blackwell, vol. 17, pages 37-75, 03.
  8. Fan, Joseph P. H. & Morck, Randall & Lixin Colin Xu & Yeung, Bernard, 2007. "Does"good government"draw foreign capital ? Explaining China's exceptional foreign direct investment inflow," Policy Research Working Paper Series 4206, The World Bank.
  9. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
  10. Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
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