The Influence Of Government Scale On FDI

Since the beginning of the 21 st century,China's economy has made great strides in terms of both size and growth rate,which is known as the "Chinese miracle" in the world.Foreign direct investment has played a vital role in China's economic and social development.Based on the empirical study of panel data of prefecture-level cities in China,this paper discusses the role of local government scale in FDI.In terms of theoretical research,this paper,by combing important domestic and foreign literatures,explains the mechanism of government size affecting FDI from two aspects of fiscal expenditure and fiscal revenue.According to the analysis,local governments attract FDI mainly through tax incentives,infrastructure investment and human capital investment.In terms of empirical research,based on the quantitative analysis of the panel data of prefecture-level cities in China from 2000 to 2014,this paper studies the impact of government size,market potential,environmental regulations and other factors on FDI,and focuses on the effect of government size on FDI.Through research,this paper concludes that government scale has a positive effect on FDI,regional infrastructure construction has a positive effect on FDI,labor cost has a negative effect on FDI,and sewage treatment cost has a negative effect on FDI.The endogenous problem is FDI,which in turn affects the form of government governance.This paper USES mining data as a tool variable to solve the endogenous problem,and concludes that government size has a positive impact on FDI.At last,the paper concludes with policy Suggestions: the government should strengthen high-tech infrastructure construction,optimize regional resource allocation,formulate relevant laws and regulations and strengthen environmental governance.