Abstract
This paper studies the effect of foreign direct investment (FDI) on industrial agglomeration. Using the differential effects of FDI deregulation in 2002 in China on different industries, we find that FDI affects industrial agglomeration negatively. As FDI brings technological spillovers and various agglomeration benefits, other forces must be at work to drive this empirical finding. We propose a simple theory that FDI may discourage industrial agglomeration due to fiercer competition pressure. We find various evidence of this competition mechanism. We also find that FDI deregulation is conducive to industrial growth, but the dispersion induced by FDI deregulation reduces the positive effect of FDI on the growth rate by 8 to 14%.
| Original language | English |
|---|---|
| Pages (from-to) | 610-639 |
| Number of pages | 30 |
| Journal | Journal of Comparative Economics |
| Volume | 51 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - Jun 2023 |
| Externally published | Yes |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 9 Industry, Innovation, and Infrastructure -
SDG 10 Reduced Inequalities
Free Keywords
- China
- Competition
- Deregulation
- FDI
- Industrial agglomeration
- Industrial growth
- WTO
ASJC Scopus subject areas
- Economics and Econometrics
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