Foreign Direct Investment and Unequal Regional Economic Growth in China

If the neighbour income again is assumed to be the average income DY₂ = 0, and
following DY₂² = 0 we have

GY = («о + α_ωγo) - a_πγo DY + (a_ω - a_uDY)(γiDY + Y2 DY² + Y₃DOPEN)

⁺ βιo(C⅛o ^- ⅛^dy>Λ ⁽²⁸⁾

GY = («o + a_ωγo) - a_πγo DY + (a_ω - a_uDY)(γiDY + 2. DY² + γ₃DOPEN)

⁺ PioaioaioYo ^- Pio aii«ioYo^{DY (29)}

DGY = - a_iiγ_o DY + (a_io - a_iiDY)(γ_iDY + γ₂ DY² + γ₃DOPEN)

- PioanaioY₀DY (3o)

DGY = - a_iiγ_o DY + o_ioγ_iDY + a_ioγ₂DY² - a_iiγ_iDY² - c⅛_iγ₂ DY³

- βio aiiCWoDY + aioγ3DOPEN + o_n γ₃DY*DOPEN (3i)

Now the distribution of growth on income groups is described by a third degree
polynomial

^DGY = (dioYi ^- OiiYo ^- PioaiiaioYo ⁺ Oii Y3^DOPEN)DY

+ («ioY2 - a_nγi)DY² - a_uγ₂ DY³ + OioY₃DOPEN (32)

Model 5. The Investment Cycle

If the ability of attracting investments among the regions change over the years the
coefficient can change over the years after the pattern

GY = a_o + a_iGI + O₂GI₂ (33)

GI = Yo + Y_i DY + γ₂ DY² + γ₃DOPEN (34)

o_i = o_io - a_iiDY (35)

«2 = Pio (θio ⁺ Oii^DY)(Oio ⁺ Oii^DY2) ⁽36)

Y = Po + β_i*^γEAR + β₂*^γEAR² (37)

which gives the final expanded form for attracting more investments

GI = β_oo + β_io*YEAR + β_2o*YEAR²

+ (β_0i + β_ii*YEAR + β_2i*YEAR²)DY

+ (β_o2 + β_i2*YEAR + β₂₂*YEAR²)DY²

+ (β_o3 + β_i3*YEAR + β₂₃*YEAR²)DOPEN (38)

and the final form for distribution and growth.