 Gravity of intermediate inputs in productivity spillovers: Evidence from foreign direct investment in ChinaYiqing Xie and Xiao Wang Review of International Economics, 2022, vol. 30, issue 2, 629-652 Abstract: The literature on the effect of multinational firms on the productivity of domestic firms has received wide attention; however, the exact channel of productivity spillover at a more micro firm level is underexplored. Based on a multisector production model, we examine heterogeneous productivity spillovers through the channel of upstream foreign direct investment (FDI) inputs at the firm level. We construct a firm‐level distance statistic for the upstream FDI and estimate the gravity of inputs: A firm is more productive if it gains access to more FDI inputs (general productivity‐enhancing effect) and is geographically closer to upstream FDI firms (proximity effect). We find in the 2000–2007 Chinese firm data that (i) if a domestic firm’s FDI input share increases by 1 percentage point, then its productivity is increased by 2.02%, and (ii) if the firm’s distance from upstream FDI firms is 10% greater, then its productivity is reduced by 0.59%. The results are robust after controlling for FDI firm location selection bias and other productivity spillover channels. Date: 2022 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:reviec:v:30:y:2022:i:2:p:629-652 Ordering information: This journal article can be ordered from Access Statistics for this article Review of International Economics is currently edited by E. Kwan Choi More articles in Review of International Economics from Wiley Blackwell |
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