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BILATERAL RENT‐SEEKING AND GROWTH OF FDI INFLOW IN CHINA: THEORY AND EVIDENCE
Author(s) -
Keng Shu,
Lee ChienChiang,
Li Weiping,
Shen Jim Huangnan
Publication year - 2020
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/coep.12459
Subject(s) - economics , foreign direct investment , china , incentive , rent seeking , construct (python library) , international economics , inflow , monetary economics , macroeconomics , market economy , physics , computer science , mechanics , law , programming language , politics , political science
This research proposes a new theory called bilateral rent‐seeking to explain the dramatic growth of foreign direct investment (FDI) inflow into China over the past several decades. We construct a Nash bargaining model to illustrate the relevance of how the reciprocal relationship between the local state and foreign investors leads to the greater incentives for the latter to invest in the local market, thus resulting into the huge FDI inflows into the domestic market in China in the past several decades. The empirically evidence presented in the end is broadly consistent with the theories proposed in this paper ( JEL D21, D72, L52)