 Differences in returns to FDI between China's coast and interior: One country, two economies?Jian Su and Gary H. Jefferson Journal of Asian Economics, 2012, vol. 23, issue 3, 259-269 Abstract: In principle, returns to factors of production within single economic systems should exhibit relatively uniform returns. Notwithstanding the fact that over the past 30 years China's economy has increasingly liberalized both internally and externally, it is widely understood that wages received by industrial workers in the coast and interior have widely diverged. However, less is known about how, between China's coast and interior, relative returns to domestic capital and foreign investment have fared, although we do know that the surge of foreign direct investment in China in recent decades has been overwhelmingly concentrated in the coastal region. This paper investigates comparative factor returns within China's industrial sector as measured by the marginal productivities of labor, domestic capital, and foreign capital. Using balanced and unbalanced samples of enterprise data during 1998–2004, we find significant differences between the returns to each of these factors. This paper explores the differences in estimates of factor returns that arise from the use of balanced versus unbalanced samples and least squares versus fixed effects estimators. We conclude that while returns to labor and domestic capital are higher in China's coastal economy, returns to foreign-owned capital are higher in the interior region. Indeed, the differences are indicative of those found in the literature that estimates cross-country comparisons between OECD and developing economies, suggesting that China's economy exhibits some of the differences found between the world's more and less developed economies. Keywords: Foreign direct investment; Factor returns; Regional differences; China (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:23:y:2012:i:3:p:259-269 DOI: 10.1016/j.asieco.2010.11.006 Access Statistics for this article Journal of Asian Economics is currently edited by C. Wiemer More articles in Journal of Asian Economics from Elsevier |
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