Trade Costs and Location of Foreign Firms in China

Amiti, Mary; Javorcik, Beata Smarzynska

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Trade Costs and Location of Foreign Firms in China

IMF Working Paper No. 05/55

26 Pages Posted: 13 Jan 2006

See all articles by Mary Amiti

Mary Amiti

International Monetary Fund (IMF) - Trade Unit; University of Melbourne - Department of Economics; Centre for Economic Policy Research (CEPR)

Beata Smarzynska Javorcik

University of Oxford - Department of Economics; World Bank - Development Research Group (DECRG); Centre for Economic Policy Research (CEPR)

There are 3 versions of this paper

Date Written: March 2005

Abstract

This study examines the determinants of entry into by foreign firms, using information on 515 Chinese industries at the provincial level during 1998-2001. The analysis, rooted in the new economic geography, focuses on market and supplier access within and outside the province of entry, as well as production and trade costs. The results indicate that market and supplier access are the most important factors affecting foreign entry. Access to markets and suppliers in the province of entry matters more than access to the rest of China, which is consistent with market fragmentation due to underdeveloped transport infrastructure and informal trade barriers.

Keywords: Foreign direct investment, trade costs, market access, supply access

JEL Classification: F1, F23

Suggested Citation: Suggested Citation

Amiti, Mary and Javorcik, Beata Smarzynska, Trade Costs and Location of Foreign Firms in China (March 2005). IMF Working Paper No. 05/55, Available at SSRN: https://ssrn.com/abstract=874277