The Crowding-in and Crowding-out Effects of FDI on Domestic Investment in the Yangtze Delta Region

In recent years, the economic development of China's Yangtze River Delta region, especially Foreign Direct Investment (FDI) in the area, has attracted the attention of academics in China and abroad. This paper studies the correlation between FDI and the Yangtze River Delta's economic growth from a quantitative point of view. Through regression analysis, a strong correlation is found between FDI and the economic development of the Yangtze River Delta region. The Cobb-Douglas production function and Thoro-Swan growth model are used with selected panel data from 2000 to 2008. It is concluded that FDI in the region creates jobs and increases the efficiency of labour resources. Furthermore, the empirical analysis of FDI supports the crowding-in and crowding-out effects of regional internal investment, and it reveals that FDI has a crowding-in effect on regional economic development, i.e., each unit of FDI brings 2.4241 units of domestic investment.