The Quality Of Transportation Infrastructure And Location Selection Of FDI

It has reached a general consensus in academia that the FDI which carrying superb technology and advanced management experience promotes the economic development of the host country.Since the reform and opening,China has taken the ride on economic development by "market-for-technology" approach with attracting foreign investment vigorously.At the same time,a more fundamental fact is that the transportation infrastructure in the area has also been improved significantly during this period.Whether there is some correlation between the two,specifically,how does the improvement of transportation infrastructure quality affect the location of FDI in our cities?Our government has always attached great importance to the construction of transportation infrastructure.Increasing the density and quality of transportation networks across the country gradually,enhancing the accessibility of the cities between the central western regions and the east area constantly,shortening the trips among major cities in various places successively has been major measures for our government to change the current relative lack of infrastructure in central and western China and promote the coordinated development of regional economy.The FDI in different regions has huge differences in technological spillovers and demonstration effects,which became an important factor that restricts the coordinated development of economy and the rational distribution of industries in our country.Therefore,influencing the location choice of FDI by improving the quality of transportation infrastructure has become a strategic choice for promoting coordinated economic development for both central and local governments.Naturally,studying the effect of transportation infrastructure quality on the location selection of FDI is an important research proposition and has much practical significance undoubtedly.Combining with the background of China's railway speed-up,this paper examines the effect of the quality of transport infrastructure brought by the railway speed-up on the urban FDI along the line.Taking the speed-up of railways as an entry point is beneficial to supplementing the existing literature on the choice of location of FDI and providing direct empirical support for improving local infrastructure and attracting FDI to promote regional coordinated development.Focusing on prefecture-level cities in the provinces along the Beijing-Guangzhou Line and the Beijing-Shanghai Line,this article studies the effect of railway speed-up on the FDI of urban city along the line systematically by using the micro-data.Specifically,constructs the panel data of cities with speed-up and non-speed-up,uses difference-in-differences method,and identifies the effect of improving the quality of transportation infrastructure on FDI from the urban fixed effects.The article shows that the speed-up of railways can promote the FDI of the cities along the way significantly.After controlling the variables of material and human capital,industrial structure and the endogenous problems,this conclusion is still significant.Besides,this paper found:(1)compared with the quality of infrastructure,the effect of infrastructure represented by railway mileage on FDI inflow is insignificant,suggesting that the quantitative expansion of transportation infrastructures is not a useful way for attracting FDI.(2)The effects of the quality of transport facilities on FDI is not immediate,but rather a long-term effect.(3)After the railway speed-up,the hyper-center cities did not have a "siphon effect" on FDI in other cities,while port cities played a strong radiation role in the FDI inflow in the surrounding areas.This paper attempts to make breakthroughs in the existing literature from the following points: First,from the perspective of railway speed-up,the article systematically examine the effect of the improvement of transport infrastructure on the inflow of FDI.The study is close to Sone et al.(2013),who focused on the effects of improved infrastructure quality brought by the acceleration of the Japanese railways.However,they focus on the impact of infrastructure quality on the financial performance of railway operators.Based on this document,this article further examines the impact of infrastructure quality improvement on FDI location selection.Second,this article uses difference-in-differences method to identify the impact of improvement quality of infrastructure represented by railway speed-up from urban fixed effect,this avoids the confusion between the infrastructure effect of traditional measurement model estimation and urban fixed effect.The third is data selection,which is different from the provincial or national data used in the former literature.This paper uses the micro-level city data to avoid the macro-data aggregation error relatively and increase the reliability of the main conclusions.Finally,to deal with the endogenous problem of railways,the paper adopts novel instrumental variables to clearly control the endogenous problem of railway speeding,making the conclusion of this paper more robust.Though this paper examines the effect of two representative railway lines speed-up on urban FDI location,this article does not further expand the scope of sample choices due to data limitations.In addition,the channel and the micro-mechanism of this promotion effect are also worthy of studying for future research.