Trade and Foreign Direct Investment in China: A Political Economy Approach

Lee Branstetter and Robert Feenstra

No 7100, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We view the political process in China as trading off the social benefits of increased trade and foreign direct investment, against the losses incurred by state-owned enterprises due to such liberalization. A model drawing on Grossman and Helpman (1994, 1996) is used to derive an empirically estimable government objective function. The key structural parameters of this model are estimated using province-level data on foreign direct investment and trade flows in China, over the years 1984-1995. We find that the weight applied to consumer welfare is between one-fifth and one-twelfth of the weight applied to the output of state-owned enterprises. We find that governmental preferences have shifted over time, but even in recent periods the weight on consumer welfare is only one-half of the weight on state-owned enterprises. This suggests that China may find it politically difficult to follow through with liberalizing its trade and investment regimes, such as under its WTO accession proposal.

JEL-codes: F13 F21 (search for similar items in EconPapers)
Date: 1999-04
New Economics Papers: this item is included in nep-cdm, nep-dev, nep-ifn and nep-pol
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Published as Branstetter, Lee G. & Feenstra, Robert C., 2002. "Trade and foreign direct investment in China: a political economy approach," Journal of International Economics, Elsevier, vol. 58(2), pages 335-358, December.

Downloads: (external link)
http://www.nber.org/papers/w7100.pdf (application/pdf)

Related works:
Journal Article: Trade and foreign direct investment in China: a political economy approach (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:7100

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w7100

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().