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Does Chinese Investment Contribute to The US Economy? An Analysis of Selected US States’ Growth, Employment and Exports

  • Hasanat Shah, Syed
  • Li, Jun Jiang
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    Our paper analyzed the impact and causal relation of outbound Chinese FDI on growth, employment and export performance of 16 selected US states. The study employed Panel data where contemporaneous panel fixed estimation results shows that the impact of Chinese outbound FDI on employment and export are insignificant. However, the impact of FDI on growth is positive and significant in interaction with States export to China. Applying heterogeneous panel causality approach on a refined dynamic panel model indicates that Chinese FDI does not cause GDP, exports and employment while the results of reverse causality shows that US States GDP (market size) cause the inflow of Chinese outbound FDI. Though the impact of meager Chinese out bound FDI in the US is insignificant to marginally positive but in no way the impact is adverse. Keeping in view the experience of Japanese outbound FDI to the US in 1980's, we come up with some policy recommendation for Chinese investors.

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    File URL: http://mpra.ub.uni-muenchen.de/52575/1/MPRA_paper_52575.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 52575.

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    Date of creation: 2013
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    Handle: RePEc:pra:mprapa:52575
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    1. Mortimore, Michael, 2000. "Corporate Strategies for FDI in the Context of Latin America's New Economic Model," World Development, Elsevier, vol. 28(9), pages 1611-1626, September.
    2. Gabor Hunya, 2002. "Restructuring Through FDI in Romanian Manufacturing," wiiw Research Reports 287, The Vienna Institute for International Economic Studies, wiiw.
    3. Dees, Stephane, 1998. " Foreign Direct Investment in China: Determinants and Effects," Economic Change and Restructuring, Springer, vol. 31(2-3), pages 175-94.
    4. Barry, F & Bradley, J, 1997. ""FDI and Trade : The Irish Host-Country Experience"," Papers 97/13, College Dublin, Department of Political Economy-.
    5. Head, Keith & Ries, John & Swenson, Deborah, 1995. "Agglomeration benefits and location choice: Evidence from Japanese manufacturing investments in the United States," Journal of International Economics, Elsevier, vol. 38(3-4), pages 223-247, May.
    6. Nigel Driffield & Karl Taylor, 2002. "Spillovers from FDI and Skill Structures of Host-Country Firms," Discussion Papers in Economics 02/4, Department of Economics, University of Leicester.
    7. Gustavo J. Bobonis & Howard J. Shatz, 2007. "Agglomeration, Adjustment, and State Policies in the Location of Foreign Direct Investment in the United States," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 30-43, February.
    8. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    9. Nigel Driffield, 2001. "Inward investment, industry concentration and the speed of adjustment," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 137(2), pages 193-214, June.
    10. Coughlin, Cletus C & Terza, Joseph V & Arromdee, Vachira, 1991. "State Characteristics and the Location of Foreign Direct Investment within the United States," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 675-83, November.
    11. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December.
    12. Eckhardt Bode & Peter Nunnenkamp & Andreas Waldkirch, 2009. "Spatial Effects of Foreign Direct Investment in US States," Kiel Working Papers 1535, Kiel Institute for the World Economy.
    13. Sourafel Girma & Richard Kneller & Mauro Pisu, 2005. "Exports versus FDI: An Empirical Test," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 141(2), pages 193-218, July.
    14. Nair-Reichert, Usha & Weinhold, Diana, 2001. " Causality Tests for Cross-Country Panels: A New Look at FDI and Economic Growth in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 153-71, May.
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