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

Author Info

  • Matthew Cole
  • Robert Elliott
  • Jing Zhang

Abstract

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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File URL: ftp://ftp.bham.ac.uk/pub/RePEc/pdf/08-06.pdf
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Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number 08-06.

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Length: 32 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:bir:birmec:08-06
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Web page: http://www.economics.bham.ac.uk

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Keywords: FDI; corruption; governance;

Other versions of this item:

Find related papers by JEL classification:
  • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
  • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
  • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
  • P37 - Economic Systems - - Socialist Institutions and Their Transitions - - - Legal

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  1. Javorcik Beata Smarzynska & Wei Shang-Jin, 2003. "Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-34, December.
  2. Amiti, Mary & Smarzynska Javorcik, Beata, 2008. "Trade costs and location of foreign firms in China," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 129-149, February.
  3. Steven Globerman & Daniel Shapiro, 2004. "Governance Infrastructure and U.S. Foreign Direct Investment," International Finance 0404008, EconWPA.
  4. Dean, Judith M. & Lovely, Mary E. & Wang, Hua, 2005. "Are foreign investors attracted to weak environmental regulations? Evaluating the evidence from China," Policy Research Working Paper Series 3505, The World Bank.
  5. Mohsin Habib & Leon Zurawicki, 2002. "Corruption and Foreign Direct Investment," Journal of International Business Studies, Palgrave Macmillan, vol. 33(2), pages 291-307, June.
  6. 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.
  7. Globerman, Steven & Shapiro, Daniel, 2002. "Global Foreign Direct Investment Flows: The Role of Governance Infrastructure," World Development, Elsevier, vol. 30(11), pages 1899-1919, November.
  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. James R. Hines, Jr., 1995. "Forbidden Payment: Foreign Bribery and American Business After 1977," NBER Working Papers 5266, National Bureau of Economic Research, Inc.
  10. Toke S. Aidt, 2003. "Economic analysis of corruption: a survey," Economic Journal, Royal Economic Society, vol. 113(491), pages F632-F652, November.
  11. 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.
  12. 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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Cited by:

  1. Wilson, Ross, 2016. "Does Governance Cause Growth? Evidence from China," World Development, Elsevier, vol. 79(C), pages 138-151.
  2. Siqi Zheng & Matthew E. Kahn & Hongyu Liu, 2009. "Towards a System of Open Cities in China: Home Prices, FDI Flows and Air Quality in 35 Major Cities," NBER Working Papers 14751, National Bureau of Economic Research, Inc.
  3. Wu, Alfred M. & Lin, Mi, 2010. "Determinants of government size: Evidence from China," MPRA Paper 27089, University Library of Munich, Germany.
  4. Petra Persson & Ekaterina Zhuravskaya, 2016. "The limits of career concerns in federalism: evidence from China," Post-Print halshs-01313799, HAL.
  5. Shih-Ying Wu & Mei-Jane Teng, 2012. "Fiscal decentralization and multinational firms’ ownership: evidence from China," Economics of Governance, Springer, vol. 13(3), pages 237-262, September.
  6. Esiyok, Bulent & Ugur, Mehmet, 2011. "Foreign direct investment in provinces: A spatial regression approach to FDI in Vietnam," MPRA Paper 36145, University Library of Munich, Germany, revised 05 Jan 2012.
  7. Zhang Y., 23. "Forest industry foreign investments: case study of three companies in China," Scandinavian Forest Economics: Proceedings of the Biennial Meeting of the Scandinavian Society of Forest Economics, Scandinavian Society of Forest Economics, issue 44, May.
  8. Jean-Louis Combes & Mary-Françoise Renard & Sampawende Jules Tapsoba, 2015. "Provincial Public Expenditure in China: A Tale of Profligacy," Working Papers halshs-01217332, HAL.
  9. Gillanders, Robert & Parviainen, Sinikka, 2014. "Experts’ Perceptions versus Firms’ Experiences of Corruption and Foreign Direct Investment," MPRA Paper 58991, University Library of Munich, Germany.
  10. Qu, Guangjun & Sylwester, Kevin & Wang, Feng, 2016. "Anticorruption and Growth: Evidence from China," MPRA Paper 72190, University Library of Munich, Germany.
  11. Wilson, Ross, 2015. "Does Governance Cause Growth? Evidence from China," Working Papers 2015:14, Lund University, Department of Economics.
  12. Arch G. Woodside & Man-Ling Chang & Cheng-Feng Cheng, 2012. "Government Regulations of Business, Corruption, Reforms, and the Economic Growth of Nations," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 11(2), pages 127-142, December.
  13. Hawkes, Denise Donna & Yerrabati, Sridevi, 2015. "Institutions and investment in South and East Asia & Pacific region: Evidence from meta-analysis," Economics Discussion Papers 2015-62, Kiel Institute for the World Economy (IfW).
  14. Wooster, Rossitza B. & Paul, Donna L., 2016. "Leadership positioning among U.S. firms investing in China," International Business Review, Elsevier, vol. 25(1), pages 319-332.
  15. Lisciandra, Maurizio & Millemaci, Emanuele, 2015. "The Economic Effect of Corruption in Italy: A Regional Panel Analysis," MPRA Paper 62173, University Library of Munich, Germany.

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