Prema-chandra Athukorala: This paper examines the impact of increase in domestic wages on FDI inflows to China focusing on two interesting issues: how do domestic wage increases change the inter-province distribution of FDI in China; and do wage differentials with China impact on shifting FDI inflows from China to neighboring Asian countries. The empirical analysis is based on two new annual panel data sets covering 29 provinces in China, and China and six major member countries of ASEAN (Indonesia, Cambodia, Laos, the Philippines, Thailand, and Vietnam) from 2005 to 2015. The findings suggest that wage increases in China have a statistically and economically significant effect on both inter-province allocation of FDI within China and the relative attractiveness for foreign investors of China's low-income neighbors. The econometrics of the paper are sound, as...

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