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Dialect Diversity and Foreign Direct Investment in China
Author(s) -
Feng Wei,
Wu Yanrui,
Fu Yue
Publication year - 2021
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.12370
Subject(s) - foreign direct investment , diversity (politics) , spillover effect , china , human capital , international economics , economic geography , investment (military) , absorption (acoustics) , economics , geography , political science , market economy , macroeconomics , physics , politics , acoustics , law , archaeology
This paper examines the relationship between dialect diversity and foreign direct investment (FDI) using a dataset of 230 Chinese cities for the period 2000–2014. We find that dialect diversity and FDI absorption are negatively correlated. However, this negative relationship disappears gradually over time. Several underlying mechanisms are identified. In particular, it is found that dialect diversity impedes human capital development and hence obstructs FDI absorption. Our results also show that there are threshold and spatial spillover effects. This research increases knowledge of FDI location choice and has implications for foreign investment policymaking.