How Effective are Investment Promotion Agencies? Evidence from China

Using both firm-level and city-level data from the Chinese National Bureau of Statistics and unique information on investment promotion agencies (IPA) in China, the present paper evaluates whether IPA affect foreign direct investment (FDI) from the perspective of both intensive and extensive margins...

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Bibliographic Details
Published inJapanese economic review (Oxford, England) Vol. 68; no. 2; pp. 232 - 243
Main Authors Ni, Bin, Todo, Yasuyuki, Inui, Tomohiko
Format Journal Article
LanguageEnglish
Published Singapore Springer Singapore 01.06.2017
Springer Nature B.V
Subjects
Bias
Development Economics
Dissemination
Econometrics
Economic History
Economics
Foreign investment
Foreign owned US companies
Macroeconomics/Monetary Economics//Financial Economics
Microeconomics
Trade promotion
F21
F23
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Summary:Using both firm-level and city-level data from the Chinese National Bureau of Statistics and unique information on investment promotion agencies (IPA) in China, the present paper evaluates whether IPA affect foreign direct investment (FDI) from the perspective of both intensive and extensive margins; that is, re-investment by incumbent foreign-owned firms and total new FDI inflows into the city, respectively. After controlling for potential determinants of FDI and correcting for biases due to endogeneity, we find that, in general, IPA do not necessarily increase FDI in either case. However, IPA are found to promote re-investment by large foreign-owned firms. The results imply difficulty in the dissemination of information about the business environment to foreign investors.
ISSN:1352-4739
1468-5876
DOI:10.1111/jere.12089