How Effective are Investment Promotion Agencies? Evidence from China

Bin Ni, Yasuyuki Todo, Tomohiko Inui

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)232-243
Number of pages12
JournalJapanese Economic Review
Volume68
Issue number2
DOIs
Publication statusPublished - 2017 Jun

ASJC Scopus subject areas

  • Economics and Econometrics

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