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Deng, Ziliang
Languages: English
Types: Unknown
One of the most important aspects of foreign direct investment (FDI) is that it embodies advanced technologies and business practices which can spill over to domestic firms via various channels, e.g. labour mobility, input-output linkages, export of multinational affiliates, demonstration and competition.\ud \ud This research combines computable general equilibrium (CGE) modelling and econometric techniques to quantify FDI productivity spillovers. The research is conducted in the context of the Chinese economy. \ud \ud A static lOl-sector CGE model is constructed to measure the endogenous productivity spillovers of FDI. Spillover effects are analysed under three different market structure assumptions, namely perfect competition, monopolistic competition with homogeneous firms, and monopolistic competition with heterogeneous firms.\ud \ud The research results show that the presence of FDI productivity spillovers can generally improve the productivity and output level of domestic enterprises in China. Spillovers make foreign firms' total output decrease. But collectively, spillovers exert positive impact on national aggregate variables, i.e. GDP, total output and welfare. The market structure assumptions of monopolistic competition and firm heterogeneity provide more perspectives (e.g. product variety and scale) for this research than the assumption of perfect competition does.\ud \ud A removal of preferential corporate income tax treatment on foreign enterprises can increase the output level of domestic enterprises and promote national welfare. From a dynamic perspective, it could also promote the productivity splllovers from foreign firms.
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