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

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  • Matthew A Cole
  • Robert J R Elliott
  • Jing Zhang

Abstract

China's rapid growth in recent years has been matched by large increases in exports and foreign direct investment (FDI). However, within China considerable regional disparities in FDI flows exist. In this paper 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. We first construct proxies for provincial government efficiency and the extent of a region's anti-corruption effort. Our subsequent regression results confirm that FDI is attracted to provinces with relatively high levels of government efficiency and those that are actively involved in the fight against corruption.

Suggested Citation

  • Matthew A Cole & Robert J R Elliott & Jing Zhang, 2009. "Corruption, Governance and FDI Location in China: A Province-Level Analysis," Discussion Papers 09-14, Department of Economics, University of Birmingham.
  • Handle: RePEc:bir:birmec:09-14
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    References listed on IDEAS

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    1. 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, March.
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    7. 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.
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    More about this item

    Keywords

    FDI; corruption; governance;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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