Trade and foreign direct investment in China: a political economy approach

摘要

ew view the political process in China as trading off the social benefits of increased trade and foreign direct investment against the losses incurred by state-owned enterprises due to such liberalization. A model drawing on Grossman and Helpman [Am. Econ. Rev. 84 (1994)833; the Political Economy of Trade Policy: Papers in Honor of Jagdish Bhagwati, MIT Press, Cambridge(1996)199] is used to derive an empirically estimable government Objective function. The key structural parameters of this model are estimated using Province-level data on foreign direct investment and trade flows in China, over the years 1984-1995. we find that the weight applied to consumer welfare is between one-seventh and one-quarter of the weight applied to the output of state-owned enterprises.