A Study On The Influence Of FDI In Services On Income GAP In The Yangtze River Delta

After China’s opening up of service, the Yangtze River Delta region hasbecame one of the regions which has absorbed the largest services FDI by virtue ofits superior geographical advantage.However, along with the economic developmentof the Yangtze River Delta region,the income gap is widening. Since the servicessector is becoming an improtant industry in absorbing foreign capital, has theincome gap within the Yangtze River Delta region concermed with the influx ofservices FDI? If so, the impact of services FDI on the income gap of Yangtze RiverDelta region is positive or negative? And through what mechanisms and channelsdoes services FDI influence the income gap of the Yangtze River Delta region? Doesthis relationship change in different regions? Answering these matters has importanttheoretical importance for the Yangtze River Delta region and the sustainabledevelopment of China’s overall economy.This paper first analyzes the theoretical basis of the FDI impact on regionalincome gap. And form the perspective of services sector’s characteristics which isdifferent form the manufacturing industry, the special needs of the services sector forhuman captial、the significance of indirect employment creation effect、high degreeof identity of the service industry in the production and consumption and the obviouslinkage effects of services sector’s various aspects links with manufacturing areexpressed as four mechanism that services FDI affect the income gap in the YangtzeRiver Delta region: the employment effect, the price effect, technology spilloverseffect and industrial structure adjustment effect. Then based on the current situationof services FDI and income gap in the Yangtze River Delta region, we obtain theoverall trend of services FDI and income gap in the Yangtze River Delta region.Finally, through estimating the Theil coefficient of income gap in the YangtzeRiver Delta region, and using relevant data in Jiangsu, Zhejiang, Shanghai form2000to2010we analysis the impact of services FDI on the income gap in theYangtze River Delta region in empirical view. The empirical results show that theimpact of services FDI on the income gap is significantly, that the influx of foreigninvestment in the Yangtze River Delta region goes against the narrowing of incomegap in some extent. The impact of technical differences which reflects by total factorproductivity on the regional income gap is most significant.The empirical resultshow that the Yangtze River Delta region municipalities plays a reduced role of services FDI on the income gap in Jiangsu, Zhejiang, Shanghai, which the servicesFDI had no significant effect on the income gap in Shanghai. Finaly, we proposesome relevant policy recommendations of the Yangtze River Delta region combinewith the empirical results.