Working Paper: CEPR ID: DP4978
Authors: Mary Amiti; Beata Smarzynska Javorcik
Abstract: This study examines the determinants of entry by foreign firms, using information on 515 Chinese industries at the provincial level during 1998-2001. The analysis, rooted in the new economic geography, focuses on market and supplier access within and outside the province of entry, as well as production and trade costs. The results indicate that market and supplier access are the most important factors affecting foreign entry. Access to markets and suppliers in the province of entry matters more than access to the rest of China, which is consistent with market fragmentation due to underdeveloped transport infrastructure and informal trade barriers.
Keywords: foreign direct investment; market access; supply access; trade costs
JEL Codes: F10; F23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Market Access (L10) | FDI Entry (F23) |
| Supplier Access (L81) | FDI Entry (F23) |
| Production Costs (D24) | FDI Entry (F23) |
| Wages (J31) | FDI Entry (F23) |
| Electricity Prices (L97) | FDI Entry (F23) |
| Local Market Conditions (R31) | FDI Entry (F23) |