Outward FDI and Domestic Input Distortions: Evidence from Chinese Firms

Wei Tian () and Miaojie Yu ()
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Wei Tian: Peking University
Miaojie Yu: Liaoning University

Chapter Chapter 4 in Outward Foreign Direct Investment of Chinese Enterprises, 2022, pp 81-123 from Springer

Abstract: Abstract We examine how domestic distortions affect firms’ production strategies abroad by documenting two puzzling findings using Chinese firm-level data of manufacturing firms. First, private multinational corporations (MNCs) are less productive than state-owned MNCs, but they are more productive than state-owned enterprises overall. Second, there are disproportionately fewer state-owned MNCs than private MNCs. We build a model to rationalize these findings by showing that discrimination against private firms domestically incentivizes them to produce abroad. The model shows that selection reversal is more pronounced in industries with more severe discrimination against private firms, which receives empirical support.

Date: 2022
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DOI: 10.1007/978-981-19-4719-3_4

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