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

Author Info

Listed author(s):
  • 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
Handle: RePEc:bir:birmec:08-06
Contact details of provider: Postal:
Edgbaston, Birmingham, B15 2TT

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. Steven Globerman & Daniel Shapiro, 2003. "Governance infrastructure and US foreign direct investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 34(1), pages 19-39, January.
  2. 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.
  3. Dean, Judith M. & Lovely, Mary E. & Wang, Hua, 2009. "Are foreign investors attracted to weak environmental regulations? Evaluating the evidence from China," Journal of Development Economics, Elsevier, vol. 90(1), pages 1-13, September.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. Mohsin Habib & Leon Zurawicki, 2002. "Corruption and Foreign Direct Investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(2), pages 291-307, June.
  9. Toke S. Aidt, 2003. "Economic analysis of corruption: a survey," Economic Journal, Royal Economic Society, vol. 113(491), pages 632-652, November.
  10. James R. Hines, Jr., 1995. "Forbidden Payment: Foreign Bribery and American Business After 1977," NBER Working Papers 5266, National Bureau of Economic Research, Inc.
  11. 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.
  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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