FDI Spillovers and Firm Ownership in China: Labor Markets and Backward Linkages

Pacific Basin Working Paper No. 2006

Federal Reserve Bank of San Francisco Working Paper No. 2006-25

38 Pages Posted: 20 Oct 2006

See all articles by Galina Hale

Galina Hale

University of California, Santa Cruz

Cheryl Long

Colgate University - Economics Department

Date Written: August 2006

Abstract

Using firm-level data, we find that the presence of foreign firms in China is positively associated with the performance of domestically owned private firms but is negatively associated with the performance of state-owned enterprises (SOEs). In particular, we find: (1) the presence of foreign direct investment (FDI) is associated with larger differences in the wages and the quality of skilled workers between SOEs and private firms; and, (2) FDI presence is positively associated with private firms' sales to foreign firms and foreign consumers, but not with the sales of SOEs. We argue that these differences could be due to the fact that private firms have more flexible wage and personnel policies, which allows them to attract talent that facilitates positive FDI spillovers.

Keywords: FDI spillovers, institutions, SOE, privatization, China

JEL Classification: L33, F23, O17

Suggested Citation

Hale, Galina and Long, Cheryl Xiaoning, FDI Spillovers and Firm Ownership in China: Labor Markets and Backward Linkages (August 2006). Pacific Basin Working Paper No. 2006, Federal Reserve Bank of San Francisco Working Paper No. 2006-25, Available at SSRN: https://ssrn.com/abstract=938518 or http://dx.doi.org/10.2139/ssrn.938518

Galina Hale (Contact Author)

University of California, Santa Cruz ( email )

1156 High St
Santa Cruz, CA 95064
United States

Cheryl Xiaoning Long

Colgate University - Economics Department ( email )

13 Oak Drive
Hamilton, NY 13346
United States

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