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

35 Pages Posted: 24 Nov 2011

See all articles by Jia He

Jia He

The Chinese University of Hong Kong (CUHK) - Department of Finance

Oliver M. Rui

China Europe International Business School (CEIBS)

Xiaolei Zha

The Chinese University of Hong Kong (CUHK) - Faculty of Business Administration

Date Written: November 24, 2011

Abstract

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.

Keywords: lucas-paradox, foreign direct investment, generalized method of moments, province-city-samples, government policy

JEL Classification: F21

Suggested Citation

He, Jia and Rui, Oliver M. and Zha, Xiaolei, Governance Infrastructure and Location of Foreign Direct Investment in the People’s Republic of China (November 24, 2011). ADBI Working Paper No. 324, Available at SSRN: https://ssrn.com/abstract=1964087 or http://dx.doi.org/10.2139/ssrn.1964087

Jia He (Contact Author)

The Chinese University of Hong Kong (CUHK) - Department of Finance ( email )

Shatin, N.T.
Hong Kong
+882 2609 8568 (Phone)

Oliver M. Rui

China Europe International Business School (CEIBS) ( email )

699 Hong Feng Road
Pudong
Shanghai 201206
China
86-21-28905618 (Phone)
86-21-28905620 (Fax)

HOME PAGE: http://https://www.ceibs.edu/rui-oliver

Xiaolei Zha

The Chinese University of Hong Kong (CUHK) - Faculty of Business Administration ( email )

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