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Dynamic and Non-Neutral Productivity Effects of Foreign Ownership: A Nonparametric Approach

Yoonseok Lee (), Mary E. Lovely () and Hoang Pham ()
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Yoonseok Lee: Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244, https://www.maxwell.syr.edu/cpr_about.aspx?id=107374187827
Mary E. Lovely: Department of Economics, Maxwell School, Syracuse University, 110 Eggers Hall, Syracuse, NY 13244, https://www.maxwell.syr.edu/econ/Lovely,_Mary_E_/
Hoang Pham: Oregon State University, https://sites.google.com/view/hoangpham/home

No 236, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

Abstract: This paper studies two novel productivity characteristics of foreign acquisition on high-tech manufacturing firms: the dynamic and the non-Hicks-neutral effects. A dynamic productivity effect of foreign ownership arises when adoption of foreign technology and management practices takes time to fully realize. Furthermore, these dynamic adjustments may be capital or labor augmenting as adoption of advanced production technologies tends to have non-neutral productivity implications in developed countries. We propose and implement an econometric framework to estimate both effects using firm-level data from China's manufacturing sector. Our framework extends the nonparametric productivity framework developed by Gandhi, Navarro and Rivers (2020), in which identification is achieved using a firm's first-order conditions and timing assumptions. We find strong evidence of dynamic and non-neutral effects from foreign ownership, with significant differences across investment sources. Investment from OECD sources is found to provide a long-term productivity boost for all but the largest recipients, while that from Hong Kong, Macau and Taiwan does not raise performance. These findings have implications for China's declining labor share and for the rising domestic value-added content of its high-tech exports

Keywords: Foreign Direct Investment; Productivity Dynamics; Non-Hicks-Neutral Effect; China's Manufacturing Sector; Nonparametric Model (search for similar items in EconPapers)
JEL-codes: C51 D24 F23 F61 L25 L60 P33 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2021-01
New Economics Papers: this item is included in nep-cse, nep-eff and nep-sbm
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