Determinants of FDI in producer services: evidence from Chinese aggregate and sub-sectoral data

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    Abstract

    Purpose: The purpose of this paper is to examine the determinants of foreign direct investment (FDI) in producer services in China using both country aggregate and provincial sub-sectoral data. Design/methodology/approach: This paper applies autoregressive distributed lag (ARDL) cointegration and panel data regression approaches in examining the determinants of Producer Service FDI (PSFDI). Findings: Our results show differences between the determinants of aggregate FDI and PSFDI. Contrary to the typical influencing factors of general FDI (that include GDP, openness, low wages and environmental quality), the two main determinants of PSFDI inflows to China are found to be high wages and research inputs (specifically the number of research workers as a proxy for research intensity). Data drawn from 26 Chinese provinces disaggregated at sub-sector level of producer services corroborate the results. Originality/value: We add to existing literature by identifying the key determinants of inward PSFDI in China also via a provincial-level data analysis and disaggregation at sub-sectoral level of producer services.

    Original languageEnglish
    Pages (from-to)869-892
    Number of pages24
    JournalJournal of Economic Studies
    Volume48
    Issue number4
    Early online date25 Aug 2020
    DOIs
    Publication statusPublished - 27 Apr 2021

    Bibliographical note

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    This document is the author’s post-print version, incorporating any revisions agreed during the peer-review process. Some differences between the published version and this version may remain and you are advised to consult the published version if you wish to cite from it.

    Keywords

    • FDI
    • Producer services sector
    • Location determinants

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)

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