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Did FDI Really Cause Chinese Economic Growth? A Meta-Analysis

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Abstract

Foreign direct investment (FDI) has been linked to economic growth in a number of countries. Productivity spillovers at the firm level have been identified as a key element in the process by which FDI stimulates economic growth. Moreover, there is evidence of FDI-related productivity spillovers in China. Whether these spillovers have been of sufficient size to affect growth at the aggregate level, however, is an empirical question. We apply meta-analysis to the corresponding empirical literature to find an answer. Our main finding is that the effect of FDI on Chinese economic growth is much smaller than one would expect from a naïve aggregation of existing estimates. Publication bias and a profusion of estimates based on less preferred study and sample characteristics have served to inflate observed estimates. Once these effects are accounted for, the estimated effect of FDI on Chinese economic growth is reduced to statistical insignificance. This suggests that the cause(s) of the Chinese “economic miracle” likely lie elsewhere.

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File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/1615.pdf
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Paper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 16/15.

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Length: 40 pages
Date of creation: 26 Jul 2016
Handle: RePEc:cbt:econwp:16/15
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Keywords: Meta-analysis; FDI; China; economic growth;

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Find related papers by JEL classification:
  • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
  • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
  • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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Cited by:

  1. Nazila Alinaghi & W. Robert Reed, 2016. "Meta-Analysis and Publication Bias: How Well Does the FAT-PET-PEESE Procedure Work?," Working Papers in Economics 16/26, University of Canterbury, Department of Economics and Finance.

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  1. Meta-Analysis in Economics

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