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Governance Infrastructure and Location of Foreign Direct Investment in the People’s Republic of China

  • He, Jia

    (Asian Development Bank Institute)

  • Rui, Oliver M.

    (Asian Development Bank Institute)

  • Zha, Xiaolei

    (Asian Development Bank Institute)

In this study, using hand-collected data on FDI for more than 200 cities, the authors examine whether the Lucas paradox of capital exists within the PRC by adopting the dynamic panel data generalized method of moments (GMM) framework to avoid the potential endogeneity issue. Using both provincial- and city-level data, the empirical results show that FDI flows to the PRC, as proxied by total GDP and per capita GDP, favor rich regions over poor regions. They also find that regional economic growth has no significant impact on FDI. These findings support the existence of the Lucas paradox in the PRC.

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File URL: http://www.adbi.org/files/2011.11.23.wp324.governance.infrastructure.fdi.prc.pdf
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Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 324.

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Length: 35 pages
Date of creation: 23 Nov 2011
Date of revision:
Handle: RePEc:ris:adbiwp:0324
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