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Spatial Spillovers from Foreign Direct Investment: Evidence from the Yangtze River Delta in China
Author(s) -
Tanaka Kiyoyasu,
Hashiguchi Yoshihiro
Publication year - 2015
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/cwe.12106
Subject(s) - spillover effect , foreign direct investment , endogeneity , externality , china , economics , productivity , spatial econometrics , international economics , investment (military) , delta , monetary economics , business , macroeconomics , econometrics , geography , microeconomics , archaeology , engineering , aerospace engineering , politics , political science , law
This paper examines the spatial externality from foreign direct investment on domestic firms. Using Chinese firm‐level data for 2004, and after accounting for an endogeneity problem, we find that foreign firms generate a significantly positive spillover effect on the regional productivity of domestic firms in similar counties and industries. Estimating a spatial‐autoregressive model, we further show that such local spillovers could transmit to domestic firms in other counties and industries through interactions among domestic firms. However, these spatial multiplier effects decline with distance, thereby reducing the foreign direct investment spillover effects for domestic firms in distant locations.