ofpla
tscaleeco
omiesa
dcorporatescaleeco
omiesShealsoaddsadummyreprese
ti
gwhetheracou
tryhasapoliticalcoupi
thelastdecadeI
herra
domeffectsestimatio
almostallthevariableshavetherightsig
sa
daresig
ifica
tThemajorexceptio
isthecorporatetaxrateswhichhastheoppositesig
aspredictedGasta
agaNuge
ta
dPashamova1998focuso
policyreformsi
developi
gcou
triesasdetermi
a
tsofforeig
directi
vestme
ti
flowsTheyemploybothordi
aryleastsquaresaswellaspa
elestimatio
sTheexpectedratesofgrowththecorporatetaxratesthedegreeofcorruptio
a
dthedegreeofope
esstoforeig
directi
vestme
tareallimporta
tdetermi
a
tsofforeig
directi
vestme
tflowsi
totheseeco
omiesHi
es1995a
dWei1997bothexami
etheimpactofi
stitutio
alfactorso
foreig
directi
vestme
tByemployi
gacorruptio
i
dexHi
esshowsthatafter1977USforeig
directi
vestme
tgrewfasteri
lesscorruptcou
triesWei1997usesOECDdirecti
vestme
tdataa
dshowsthatbothcorruptio
a
dtaxrateshave
egativeeffectso
foreig
directi
vestme
tflowsWei’sestimatio
sarecrosssectio
al
fTheEmpiricalModelI
thissectio
weprovidea
empiricalmodeltoestimatetheimpactofChi
ao
thei
warddirecti
vestme
tofvariousAsia
eco
omiesTheeco
omiesweexami
ei
cludeHo
gKo
gSi
gaporeTaiwa
theRepublicofKoreaThaila
d
3
MalaysiaPhilippi
esa
dI
do
esiaTheyearsexami
edi
thisa
alysisarefrom1985to2001Thestrategyhereistoco
trolforallthesta
dardexpla
atoryvariablesofforeig
directi
vestme
ti
theAsia
eco
omiesButweadda
additio
alvariablereprese
ti
gtheChi
afactorToproxyfortheChi
aEffectwechoosethelevelofthei
flowofChi
a’sforeig
directi
vestme
tObviouslyChi
esei
wardforeig
directi
vestme
tca
alsobedepe
de
to
thei
warddirecti
vestme
toftheseAsia
eco
omiesaswellasthesta
dardexpla
atoryvariablesI
ordertocapturesuchareciprocalrelatio
shipbetwee
thei
flowofFDIi
Chi
aa
dthati
otherAsia
eco
omiestheFDIequatio
forboththeAsia
eco
omiesa
dChi
aareestimatedsimulta
eouslyThebasicregressio
modelfori
wardforeig
directi
vestme
tforAsia
cou
triesa
dforChi
aarewritte
asali
earspecificatio
ofthefollowi
gform
l
AFDIααl
CLNFDIβl
AGROWTHβl
ACORRUPT
it01t1it2it
βl
ADUTYβl
AGOVβl
AWAGE
3it4it5it2
Otherrelatedliteraturei
cludesBaoCha
gSachsa
dWoo2002Fu
g
Iizakaa
dSiu2003Zha
ga
dSo
g2001etc
βl
ATELβl
AINCOMEβl
OUTFLOWβl
AOPENβl
AILLITβl
ACPTAX
6it7it8it9it10it11t
l
CLNFDIγδl
AFDIρl
CGROWTHρl
CCORUPT
t01it1t2t
ρl
CDUTYρl
CGOVρl
CWAGEρl
COPEN
3t4t5t6t
ρl
CINCOME
7t
whr