Received: 2020-09-20  |  Accepted: 2021-03-25  |  Published: 2021-06-30

Title

Infrastructure and sectoral FDI in China: an empirical analysis


Abstract

In this paper, for the first time, we investigate the relationship between infrastructure and sectoral distribution of FDI inflow in China. We use the Estimating Autoregressive Distributed Lag (ARDL) bound testing and Vector Error Correction Model (VECM) procedures of estimation. To unmask the shortcomings in the previous literature, we use a composite index of infrastructure with more than 30 indicators. The results show that there is a long-run relationship between sectoral FDI and infrastructure. A bidirectional causal relationship is confirmed by using VECM. However, we find unidirectional causality between the primary sector's FDI and infrastructure, and it is running from infrastructure to primary sector FDI. The inclusion of control variables, e.g., institutional quality, trade openness, and domestic investment, is robust in our analysis. The positive role of infrastructure in the sectoral distribution of FDI inflows is of utmost importance for policymakers and Chinese-government. Several policy implications are given in our study.


Keywords

infrastructure, foreign direct investment, Estimating Autoregressive Distributed Lag (ARDL)


JEL classifications

F21 , C22 , O17


URI

http://jssidoi.org/ird/article/65


DOI


HAL


Pages

160-175


Funding


This is an open access issue and all published articles are licensed under a
Creative Commons Attribution 4.0 International License

Authors

Mehmood, Faisal
Huazhong University of Science and Technology, Wuhan, China https://www.hust.edu.cn
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Atique, Muhammad
Huazhong University of Science and Technology, Wuhan, China https://www.hust.edu.cn
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Bing, Wang
Huazhong University of Science and Technology, Wuhan, China https://www.hust.edu.cn
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Khan, Hameed
Kohat University of Science and Technology, Kohat, Pakistan https://kust.edu.pk
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Henna, Henna
Kohat University of Science and Technology, Kohat, Pakistan https://kust.edu.pk
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Journal title

Insights into Regional Development

Volume

3


Number

2


Issue date

June 2021


Issue DOI


ISSN

ISSN 2345-0282 (online)


Publisher

VšĮ Entrepreneurship and Sustainability Center, Vilnius, Lithuania

Cited

Google Scholar

Article views & downloads

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