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Regional concentration of FDI involves trade-offs in post-reform India

Nunnenkamp, Peter; Liu, Wan-Hsin; Bickenbach, Frank

P. Chidambaram, India’s Minister of Finance, claimed that “FDI worked wonders in China and can do so in India.” However, China’s example may also point to the limitations of foreign direct investment (FDI) liberalization in promoting the host country’s economic development. FDI in China is heavily concentrated in the coastal areas, and previous studies have suggested that this has contributed to the increasing disparity in regional income and growth since the late 1970s.
The regional concentration of FDI tends to go hand in hand with agglomeration of economic activity in general and, presumably, domestic investment as well. Conversely, FDI-related spillovers, which are crucially important in order for FDI to have positive effects on growth, have a spatial dimension—i.e., their impact weakens with distance.

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More About This Work

Academic Units
Vale Columbia Center on Sustainable International Investment
Publisher
Vale Columbia Center on Sustainable International Investment
Series
Columbia FDI Perspectives, 118
Published Here
April 16, 2014

Notes

A Chinese version of this paper is available at http://dx.doi.org/10.7916/D8CZ357F.

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