Amelioration Of Gravity Model Based On Location Choice Of FDI To China

The gravity model is a law in physics, it points out the gravitation between two objects is in direct proportion to their quality, in inverse proportion to distance among them. The gravity model was quoted to the social economic research field at the beginning of the sixties of the 20th century, have created and developed a lot of different gravity models for different research purposes (or the formula , equation). Studying and applying on gravity model is rising in China,there are many shotcomings on demonstration and theoritical foundation study.This paper means to ameliorate the model and demonstrate it.The gravity model has offered the frame of a general equilibrium, experimental, easy to grasp. Enormous success made in demonstration research, its theoretical foundation is developing and abundant constantly too. The main variable of the gravity model are GDP, per capita income and distance, exchange rate and different dummy variables are introduced in the research later. The characteristic of this text has two points mainly: First, the deformation and expansion of the gravity model. Carrying on basic equation form out of shape, originally used for the equation to "one " to " one ", it can be used for studying " one " to " many " mode. Comprehensive data acquired situation, this text increase the variable exchange rate and foreign trade to GDP, with the dummy variable. Innovative regarding culture as the dummy variable, investigate it to its influence degree in real example. Second, using the improved gravity model to analysis location choice of FDI to China after carried on simply inspection. Have increased variable industrial structure, workforce and country's Chinese proportion of investment, the result shows they and investment's flow becomes positive correlation relations. During improvement and examining of gravity model, it is not remarkable to regard culture similarly as the dummy variable in the result. While the significance of the variable improves to some extent by replacing Culture with Chinese proportion in investment countries on the study of FDI to China.This article obtains from the gravity model economical reasoning, gradually analyzes its determining factors. Then carries on the distortion and the expansion to the model, and makes the preliminary examination, further adjusts to the model. Finally utilizes the adjusted model to analysis the FDI position choice.