Spatial Distribution of Foreign Direct Investment and Productivity Growth in Less Developed Regions of China

Abstract

This study examines how the spatial distribution of foreign direct investment (FDI) affects productivity growth in less developed regions of China. A systematic theoretical framework is set up concerning the potential effects of FDI capital via different channels. Following the theoretical framework, this study presents empirical evidence showing that FDI spillovers from the developed regions play a crucial role in enhancing productivity growth in the less developed regions. Empirical results also show that local FDI spillovers in less developed regions promote local productivity growth. In addition, FDI spillovers from less developed regions are not shown to have a significant effect on productivity growth in other less developed regions.