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Industry Mix and Curvilinear Spillovers from FDI in China |
William M. Tracy() |
Lally School of Management and Technology, Rensselaer Polytechnic Institute, Troy, NY 12309, USA |
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Abstract This paper uses industry and province specific Chinese industrial data to demonstrate a potential causal link between two strands of the FDI literature. The first strand suggests that the impact of spillovers from inward FDI is less robust in middle-income economies than in either high-income or low-income economies. The second strand suggests diminishing returns of inward FDI on horizontal labor productivity in low-technology industries but not in high-technology industries. This paper suggests a link between these two phenomena. Specifically, if both FDI intensity and industry mix vary with the level of economic development, then an industry-dependent relationship between inward FDI and horizontal spillovers could cause middle-income economies to derive fewer benefits from inward FDI than either high- or low-income economies. This paper also verifies the curvilinear relationship between FDI in low-technology industries and horizontal labor productivity without relying on problematic FDI from Hong Kong, Taiwan and Macao.
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Keywords
foreign direct investment
curvilinear
China
spillovers
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Issue Date: 10 August 2016
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