Downloadable (with restrictions)! Purpose - The purpose of this paper is to examine the relationships between foreign direct investment (FDI), wages and productivity in China. The direction of causality among these variables is also to be emphasized. Design/methodology/approach - The authors develop a system of equations and test the relationships based on a vector autoregressive regression (VAR) model and two‐step generalized method of moments (GMM)‐type estimation approach. They use a panel data set of China
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