Title

Three essays on international trade, development and the Chinese economy

Date of Award

2010

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

Advisor(s)

Mary E. Lovely

Keywords

International trade, Development, China, FDI, Market access, Export, Spillovers, Wage

Subject Categories

Economics

Abstract

This dissertation consists of three essays on economic geography, globalization and the Chinese economy. The theme of the first essay is the inter-regional spillovers from foreign direct investment (FDI). This essay examines the extent and possible mechanisms by which FDI spatially concentrated in a few areas boosts economic growth in other regions in a developing country. Applying the two-stage least square fixed effect estimation models to a dataset that covers 96% of Chinese cities from 1996-2004, this essay finds that "inter-regional spillovers" from FDI concentrated in China's coastal regions have a positive and significant effect on the growth of inland regions. A 1 billion yuan increase in effective coastal FDI is associated with almost a 0.058 percentage point increase in the growth rate of an inland city. In addition, such spillovers rely on an inland city's industrial development, consistent with a role for backward and forward linkages. Highly industrialized cities gain most from coastal FDI, while less industrialized cities appear to be unable to absorb spillovers from coastal investment.

The second essay revisits the concept of inter-regional spillovers by estimating whether coastal FDI and export activity have regional spillovers into inland regions in China and how these spillovers depend on different types of FDI and export activity. This essay applies the two-stage least square fixed effect models to two provincial level datasets, one for 1993-2008 and the other for 2002-2007. The results show that on average, coastal FDI has positive impacts on economic growth of inland regions while coastal export activity has negative spillovers into inland regions. Estimated inter-regional spillovers vary by location of activity. Eastern coastal FDI generates the largest positive spillovers into inland regions, possibly due to the type of firms concentrated there. Joint venture FDI has a negative impact on inland GDP while contract cooperative FDI has a positive impact on inland GDP. FDI from Hong Kong, Macao and Taiwan has a large negative impact on inland GDP. Export activity by domestic firms in coastal provinces appears to have a positive impact on inland economies while foreign firms' export activity does not.

The third paper analyzes how market access affects Chinese individuals' wages and how such impacts change over time by using urban individual survey data in 1995 and 2002.We find positive impacts of market access on wages. Such impacts become larger over time as China becomes more market-oriented. In addition, we find that international market access matters more for Chinese wages than internal market access. However, we find that over time, wages' response to internal market access rises rapidly, as inter-regional trade barriers decrease; while wage response to international market access remains fairly constant over time.

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