Foreign Direct Investment And Regional Economic Growth Based On The Analysis Of The Urbanization And Optimal Scale

Since the reform and open-up policy in China, with the rapid industrial development at well as the high-speed process of urbanization all over the country, cities’scale have been expanding. With the increase of China’s international economic cooperation, our country attracts more and more foreign direct investment. Due to the foreign direct investment (FDI) can generate the combined effect of the industry, location and agglomeration, thus the inflow of FDI has a prominent impact on the regional economic development, urban formation, and the urbanization process, which attract more and more attention from the scholars. However beforehand the research is focused on the fields, such as the motivation and space structure of the urbanization and their impact etc. Studies on the relationship of the foreign direct investment, urbanization and regional economic growth mainly use theoretical analysis and case study, lack of the research from both the theoretical and empirical perspectives to illustrate the dynamic relationship among the foreign direct investment, urbanization and regional economic growth.Both the theoretical and empirical analysis is used in the study on the interaction between the foreign direct investment, urbanization and regional economic growth. In the theoretical part, we use a theoretical model to explain the relationship between FDI and regional economic growth, and then based on the framework of endogenous growth model combined with the basic ideas of the new economic geography, we analyze the mechanism of foreign direct investment, urbanization and regional economic growth, also explore the optimal scale of the urban development; In the empirical part, we use panel data analysis methods, by selecting specific models, such as fixed effect, dynamic panel, principal component analysis and binary auto-regression. Considering the endogeneity problem in the regression, we use dynamic system GMM panel estimation and two-stage least square method, through the world and emerging economy countries panel data to examine the relationship among the foreign direct investment, urbanization and regional economic growth. The main findings from this study are as follows:First, the conclusions from theoretical analysis on the FDI, urbanization and regional economic growth are as follows:foreign direct investment has a positive impact on the regional economic growth; urbanization plays a significant role in the transmission channel from foreign direct investment spur regional economic growth.Second, the summary from empirical analysis on the FDI, urbanization and regional economic growth are as follows:From the study on how the agglomeration impact on the regional economic growth in an open economy, we find that along with the country’s rapid economic development, agglomeration benefits will be weakened. The trade-off between economic growth and regional equality may gradually lose their relationship. The inhibition policy of the agglomeration in the poorest countries will have a devastating impact on the economic growth. In addition, we also find that openness has a negative effect on the transmission channel from the agglomeration to economic growth.From the study on how the foreign direct investment influence on the urbanization, we find that foreign direct investment has job-creation effect, increase the demand of the local labor force, and thus increase the urban population. Foreign direct investment and urbanization have an inverted U-shaped relationship in China.From the study on the infrastructure development and urbanization, we find that urban infrastructure plays an important role in attracting foreign direct investment and promoting the urbanization process.Third, the conclusions from the study on the optimal scale of the infrastructure and urban development are as follows:From the study on optimal scale of the public infrastructure, we find that in the " core-periphery " equilibrium, the per capita possession of infrastructure and infrastructure density should be higher in core area in order to take advantage of the agglomeration effect, which can realize efficient inter-regional allocation of the total public expenditure and reduce the possession of private sector’s resources.From the study on the optimal scale of urban development, we find that the optimal scale of urban development has a relationship with the public education, environmental protection, urban transportation, industrial structure, urban housing prices and other urban dwellers’ liveability issues. There exists an inverted U-shaped relationship between cities’ optimal scale and urban dwellers’ liveability. We should determine a reasonable scale of urban to attain the sustainable urban development.Fourth, the study on the foreign direct investment, urbanization and service industries development shows that the service industry has the characteristics of fast agglomeration of production factors by use of FDI. Then promoting the services industry from the low-carbon perspective under the slow global economic recovery has a significance influence on the cultivating new economic growth point and adjusting the industrial structure.Compared to the previous studies, the main innovation of this study is:first,we explore the dynamic relationship among foreign direct investment, urbanization and regional economic growth with theoretical and empirical analysis, in particular, the inherent economic characteristics of the relationship is more important; Optimal scale studies effectively bridge the differences between the existing theory and empirical research, which is an important complement to the study of infrastructure and government public expenditure theory; In the empirical analysis, we adopt a variety of estimation models, considering endogeneity problem in the regression, we use dynamic system GMM and panel two-stage least square estimation method, which provide an effective solution to the endogeneity problem and make the results more convincing.