The spillover effect of FDI and its impact on productivity in high economic output regions: A comparative analysis of the Yangtze River Delta and the Pearl River Delta, China

Using a dynamic panel data spatial Durbin model, this paper aims to examine FDI spillover and impacts on urban productivity in the Yangtze River Delta (YRD) and the Pearl River Delta (PRD). We find that FDI has positive impacts on local city's productivity but its spatial spillovers behave differently in the YRD and PRD. Spatial interactions cannot be neglected in urban growth; yet YRD and PRD demonstrates significant but opposite spatial growth effects. FDI accelerates the economic growth convergence in the YRD while slows down convergence in the PRD. Positive spatial spillover of productivity occurs in the YRD while negative spatial spillover occurs in the PRD. The results point to important policy implications for the two regions to attract FDI and promote urban development.