Abstract

We use a pooled city-level data set, consisting of 2032 observations from 11 consecutive years, to examine the causal relationship between the intensity of FDI inflow and the increase of technical efficiency in various cities in China. The results confirm the exis-tence of feedback effects between per capita FDI intensity and labor productivity. However, FDI intensity in terms of the geographical size of the city does not Granger-cause the increase in labor productivity. Spillover efficiency to various cities in China is investigated in detail. We split the sample into coastal and inland cities, taking into consideration time lags. The feedback effects of labor productivity on inward FDI also are estimated statistically. Finally, we discuss the policy implications of our research. © 2000 John Wiley & Sons, Inc.

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