THE LOCATION DECISIONS OF FOREIGN INVESTORS IN CHINA: UNTANGLING THE EFFECT OF WAGES USING A CONTROL FUNCTION APPROACH

• 成果类型: Article
• 署名作者: Liu, Xuepeng; Lovely, Mary E.; Ondrich, Jan
• 署名单位: University System of Georgia; Kennesaw State University; Syracuse University
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/rest.2009.11350
• 发表日期: 2010-02
• 页码: 160-166
• 关键词: japanese direct-investment; sample selection; models; COSTS; US

摘要

There is almost no support for the proposition that capital is attracted to low wages from firm-level studies. We examine the location choices of 2,884 firms investing in China between 1993 and 1996 to offer two main contributions. First, we find that the location of labor-intensive activities is highly elastic to provincial wage differences. Generally, investors' wage sensitivity declines as the skill intensity of the industry increases. Second, we find that unobserved location-specific attributes exert a downward bias on estimated wage sensitivity. Using a control function approach, we estimate a downward bias of 50% to 90% in wage coefficients estimated with standard techniques.