Congestion costs and differences in the regional distribution of FDI in China

Congestion costs and differences in the regional distribution of FDI in China After implementing the reforms and opening up policies, China has continued to attract huge amount of foreign direct investments (FDI), but these FDI have a noticeably unbalanced spatial distribution. Why does FDI flow mostly into eastern China? Agglomeration economies and congestion costs play an important role in the spatial distribution of FDI in the country. Panel data was compiled for 287 prefectural-level cities and higher administrative units in China from 1999 to 2012 while controlling the effects of regional advantages, preferential policies, natural resources, infrastructure and other factors. Regression results verified that a high agglomeration of FDI in the eastern region of China is significantly attributed to the effects of congestion costs. Because of the particularities of the Chinese labour market and the monopolization of land market in cities, congestion costs lose the ability to regulate the spatial distribution of FDI and exert a reverse effect to distribute FDI more unevenly. In order to further open up inland regions and facilitate coordinated development between regions, the government must implement some preferential policies that encourage the flow of FDI into inland regions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Quality & Quantity Springer Journals

Congestion costs and differences in the regional distribution of FDI in China

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Publisher
Springer Netherlands
Copyright
Copyright © 2016 by Springer Science+Business Media Dordrecht
Subject
Social Sciences; Methodology of the Social Sciences; Social Sciences, general
ISSN
0033-5177
eISSN
1573-7845
D.O.I.
10.1007/s11135-016-0366-6
Publisher site
See Article on Publisher Site

Abstract

After implementing the reforms and opening up policies, China has continued to attract huge amount of foreign direct investments (FDI), but these FDI have a noticeably unbalanced spatial distribution. Why does FDI flow mostly into eastern China? Agglomeration economies and congestion costs play an important role in the spatial distribution of FDI in the country. Panel data was compiled for 287 prefectural-level cities and higher administrative units in China from 1999 to 2012 while controlling the effects of regional advantages, preferential policies, natural resources, infrastructure and other factors. Regression results verified that a high agglomeration of FDI in the eastern region of China is significantly attributed to the effects of congestion costs. Because of the particularities of the Chinese labour market and the monopolization of land market in cities, congestion costs lose the ability to regulate the spatial distribution of FDI and exert a reverse effect to distribute FDI more unevenly. In order to further open up inland regions and facilitate coordinated development between regions, the government must implement some preferential policies that encourage the flow of FDI into inland regions.

Journal

Quality & QuantitySpringer Journals

Published: Jun 6, 2016

References

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