The Impact of FDI on Labor Productivity in China: Evidence from Panel Data 2003-2020——A Study on Fiscal Decentralization as a moderating variable

Abstract

Based on the panel data of China’s 30 provinces, autonomous regions, and municipalities (hereinafter referred to as provinces) from 2003 to 2020, this paper empirically analyzes the impact of foreign direct investment (hereinafter referred to as FDI) on labor productivity by constructing a fixed-effects model, and further constructs a model to test the moderating effect of fiscal decentralization on the above two variables. The study shows that: 1) China's FDI has a positive promotion effect on labor productivity. 2) Taking 2008 as the boundary, the effect of China's FDI on labor productivity has significant stage heterogeneity. 3) Fiscal revenue decentralization and fiscal expenditure decentralization both positively regulate the relationship between FDI and labor productivity. Therefore, the Chinese government (as well as the governments of other developing economies around the world) needs to consciously introduce high-quality FDI that is suitable for the country's current development situation and to give local governments the right to select and introduce FDI that is suitable for local development to realize high-quality economic development.