Cross†country diffusion of ideology via FDI: Micro†evidence from China

Faqin Lin

The Economics of Transition, 2018, vol. 26, issue 1, 3-34

Abstract: This paper studies how foreign direct investment (FDI) contributes to ideological convergence across countries. In particular, this report focuses on whether multinational firms transfer freedom of speech (FOS) to local workers in China. Using a large source of individual survey data, it is found that those who work in foreign†invested enterprises (FIEs), especially non†Hong Kong, Macao and Taiwan (non†HMT) invested enterprises tend to prefer FOS. This is in contrast to enterprises that do not work in FIEs. Such patterns are also observed in other related human rights and cultural measures common to Western democracies, but not China's political and local culture. Using policies on FDI as exogenous instruments, and other complementary identification strategies, a causal link for such an ideological transfer is established.

Date: 2018
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