Finance & Private Sector Research

About

Countries

Data & Research

Learning

News

Projects & Operations

Publications

Topics

Home > Data & Research > Research > Programs > Finance & Private Se... > ImagebankContents

Foreign direct investment under weak rule of law : theory and evidence from China

Author:	Wang, Xiaozu; Xu, Lixin Colin; Zhu, Tian;	Collection Title:	Policy Research working paper ; no. WPS 5790
Country:	China;	Date Stored:	2011/09/06
Document Date:	2011/09/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	East Asia and Pacific
Report Number:	WPS5790	SubTopics:	Bankruptcy and Resolution of Financial Distress; Access to Finance; Emerging Markets; Debt Markets; Investment and Investment Climate
Volume No:	1 of 1

Summary: This paper develops a self-enforcing contract model to show that better economic fundamentals can help when there is weak rule of law -- but with order -- to attract foreign direct investment, whereas lowering taxes does not necessarily help. Using a cross-region Chinese dataset, the analysis finds evidence consistent with the theoretical analysis. Regional variations in tax rates and the perceived quality of formal contracting institutions are not correlated with regional inflows of foreign direct investment, but leadership characteristics are. Most conventional economic factors have the predicted effects on foreign direct investment. The finding that foreign direct investment is lower in locations where domestic private firms have better access to finance and where the air quality is poor is new to the literature.


Official Documents Official, scanned versions of documents (may include signatures, etc.)
File Type		Description	File Size (mb)

	PDF 33 pages	Official version*	2.31 (approx.)
	Text	Text version**

* The official version is derived from scanning the final, paper copy of the document and is the official,
archived version including all signatures, charts, etc.

** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
It is provided solely to benefit users with slow connectivity.

Permanent URL for this page: http://go.worldbank.org/UM7XZJQOD0