FDI mestic capita an ecnmic grwth Evience frm pane ata at China’s prvincia eve.doc

FDI, domestic capital and economic growth_ Evidence from panel data at China’s provincial level Front. Econ. China 2007, 21: 92?113 DOI 10.1007/s11459-007-0005-1 RESEARCH ARTICLE LUO Changyuan FDI, domestic capital and economic growth: Evidence from panel data at China’s provincial levelHigher Education Press and Springer-Verlag 2007 Abstract Based on panel data at the provincial level in China, this paper found that direct effects foreign direct investment FDI had on economic growth were of insignificance. However, through improving technical efficiency and “crowd- ing” in domestic investment, FDI produced positive effects on China’s economyThe state sector still played a major part in the total fixed investment, therefore, direct effects on growth were significant. Although private sector was increas- ingly important for the whole economy, it had no direct influences on economic growth. Meanwhile, neither the state sector nor private sector made contribution to the improvement on technical efficiencyKeywords FDI, economic growth, TFP, capital accumulation JEL Classification F21, O47, C33 1 Introduction China’s economy had made great progress for more than twenty years since the practice of so-called “reform and opening-up policy”. Compared to 1978, the gross domestic product GDP and the GDP per capita had been increased by five to seven times in 2002 respectively. While the economy was growing con- tinually, China had opened wider to the outside world. By the end of 2002, the accumulated amount actually used by the FDI amounted to 446.26 billion US Translated from Shijie Jingji Wenhui 世界经济文汇 World Economic Papers, 2006, 4: 27?43 LUO Changyuan Center for European Studies CES, Fudan University, Shanghai 200433, China China Center for Economic Studies CCES, Fudan University, Shanghai 200433, China E-mail: Chyluo@//.DI, domestic capital and economic growth 93 dollars, the ratio of actually used FDI inflow to GDP had increased fr