Title: Economic Institutions and FDI Location Choice: Evidence from U.S. Multinationals in China
Reference Number: 1170
Publication Date: March 2007
JEL Classifcation:

Julan Du
Chinese University of Hong Kong

Yi Lu
The University of Hong Kong

Zhigang Tao
The University of Hong Kong


This paper examines the impacts of economic institutions, including property rights protection and contract enforcement, on the location choice of foreign direct investment. From a data set of 6,288 U.S. multinationals investing in various China's regions for the period of 1993-2001, it is found that U.S. multinationals prefer to invest in those regions that have better protection of intellectual property rights, lower degree of government intervention in business operations, lower level of government corruption, and better contract enforcement. Our results are robust to alternative measures of economic institutions, and to the inclusion of control variables such as those for agglomeration economies, and other traditional factors of FDI location choice.


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Last modified: 07/06/2007