Foreign Direct Investment and Regional Inequality in China

University of Nottingham Working Paper No. 2007/32

38 Pages Posted: 23 Oct 2007

See all articles by Kailei Wei

Kailei Wei

Middlesex University - Business School

Shujie Yao

University of Nottingham

Liu Aying

Middlesex University - Business School

Multiple version iconThere are 2 versions of this paper

Date Written: October 2007

Abstract

One downside effect of rapid economic growth in China has been the ever rising inter-regional inequality. Foreign direct investment (FDI) has been blamed for driving the Chinese regions apart. It is difficult to reconcile the positive effect of FDI on economic growth with its potential 'negative' effect on regional inequality. Using the largest panel dataset for the Chinese regions over 1979-2003 and employing an augmented Cobb-Douglas production function, this paper proves that FDI has been an important factor of economic growth in China. It also suggests that it is the uneven distribution of FDI instead of FDI itself that has caused regional growth differences.

Keywords: Foreign direct investment, regional inequality, China

JEL Classification: O11, O57, F43

Suggested Citation

Wei, Kailei and Yao, Shujie and Aying, Liu, Foreign Direct Investment and Regional Inequality in China (October 2007). University of Nottingham Working Paper No. 2007/32, Available at SSRN: https://ssrn.com/abstract=1023897 or http://dx.doi.org/10.2139/ssrn.1023897

Kailei Wei

Middlesex University - Business School ( email )

The Burroughs
London, NW4 4BT
United Kingdom

Shujie Yao (Contact Author)

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Liu Aying

Middlesex University - Business School ( email )

The Burroughs
London, NW4 4BT
United Kingdom

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