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Full-Text Articles in Industrial Organization
Foreign Direct Investment And Industrial Agglomeration: Evidence From China, Wen-Tai Hsu, Yi Lu, Xuan Luo, Lianming Zhu
Foreign Direct Investment And Industrial Agglomeration: Evidence From China, Wen-Tai Hsu, Yi Lu, Xuan Luo, Lianming Zhu
Research Collection School Of Economics
This paper studies the effect of foreign direct investment (FDI) on industrial ag-glomeration. Using the differential effects of FDI deregulation in 2002 in China on different industries, we find that FDI actually affects industrial agglomeration neg-atively. As FDI brings technological spillovers and various agglomeration benefits, other forces must be at work to drive our empirical finding. We propose a simple theory that FDI may discourage industrial agglomeration due to fiercer competition pressure. We find various evidence on this competition mechanism. We also examine an alternative theory based on spatial political competition, but find no evidence sup-porting it. On industrial growth, …