FDI and Industrial Productivity in China: Evidence from Panel Data in 2001–06

10 Pages Posted: 19 Jul 2010

See all articles by Zhongxiu Zhao

Zhongxiu Zhao

University of International Business and Economics (UIBE) - School of International Trade and Economics

Kevin H. Zhang

Illinois State University - Department of Economics; University of Colorado

Abstract

How does foreign direct investment (FDI) affect China's industrial productivity? While the topic is important, the relevant empirical studies in the literature have been limited. This paper attempts to close the gap by investigating the issue with panel data in the period 2001–06. Empirical models for both productivity level and growth are developed, in which two channels are identified through which FDI may affect industrial productivity directly and indirectly. The estimates suggest that FDI has positive direct and spillovers effect on China's industrial productivity level and growth, and the contribution of FDI to productivity is enhanced by its interaction with China's human capital. While labor-intensive industries benefit more from FDI direct effects, capital-intensive industries gain more from FDI spillover effects.

Suggested Citation

Zhao, Zhongxiu and Zhang, Kevin H., FDI and Industrial Productivity in China: Evidence from Panel Data in 2001–06. Review of Development Economics, Vol. 14, No. 3, pp. 656-665, August 2010, Available at SSRN: https://ssrn.com/abstract=1643596 or http://dx.doi.org/10.1111/j.1467-9361.2010.00580.x

Zhongxiu Zhao (Contact Author)

University of International Business and Economics (UIBE) - School of International Trade and Economics ( email )

10 East Huixin Street
Chaouang District
Beijing, 100029
China

Kevin H. Zhang

Illinois State University - Department of Economics ( email )

Normal, IL 61790-4200
United States
309-438-8928 (Phone)
309-438-5228 (Fax)

University of Colorado

1070 Edinboro Drive
Boulder, CO 80309
United States

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