FDI penetration and manufacturing agglomeration: an analysis based on empirical evidence from 21 industries (2004–2010)

In this essay, a test is carried out on the relationship between FDI penetration and the geographic agglomeration of manufacturing industries in recent years from an empirical perspective. By setting up static and dynamic models, the disparity in results arising from possible inaccuracies is brought under control. The results show that FDI penetration exerts considerable positive impact on the geographic agglomeration of manufacturing industries, whether the model is static or dynamic. It is also found out by the dynamic model that there is in the geographic agglomeration of manufacturing industries a kind of inertial force operating, by which is meant that the first order lag of the agglomeration degree of manufacturing industries impacts in a significant way that of the present one.