Productivity Spillover of Foreign Direct Investment: A Computable General Equilibrium Model of China

Ziliang Deng, Rodney Falvey and Adam Blake

No 331758, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: A computable general equilibrium (CGE) model is constructed to capture the endogenous productivity spillover from foreign-invested firms to domestic firms in China. This paper summarizes the main results we have found so far. There are three contributions we have made to the knowledge. First and foremost, the endogenous productivity increase in manufacturing sectors caused by FDI spillover has been successfully introduced into a CGE model. The productivity spillover effects in both perfectly competitive and imperfectly competitive markets are also compared. This technique can be readily applied to a global dynamic CGE model embodying trade-FDI-productivity spillover linkages. Second, we have estimated and compared the importance of four spillover channels in econometric analyses and the CGE model. Third, we have made a tentative assessment of Chinese FDI policies characterised by swapping market access for technology with the CGE prototype model. There are various directions worth future research, e.g. to estimate productivity spillover parameters by industries with firm-level data, to extend the research to include spillovers in services sectors, and to construct a global dynamic model capturing capital accumulation and trade-FDI-productivity interactions.

Keywords: Productivity Analysis; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 25
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:331758

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