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Multinationals, Endogenous Growth, and Technological Spillovers: Theory and Evidence*
Author(s) -
Baldwin Richard,
Braconier Henrik,
Forslid Rikard
Publication year - 2005
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2005.00546.x
Subject(s) - endogenous growth theory , openness to experience , economics , grossman , multinational corporation , foreign direct investment , empirical evidence , growth theory , returns to scale , scale effects , monetary economics , international economics , international trade , macroeconomics , scale (ratio) , human capital , neoclassical economics , production (economics) , market economy , psychology , social psychology , philosophy , physics , finance , epistemology , quantum mechanics , keynesian economics
FDI has received surprisingly little attention in theoretical and empirical work on openness and growth. This paper presents a theoretical growth model where MNCs directly affect the endogenous growth rate via technological spillovers. This is novel since other endogenous growth models with MNCs, e.g. the Grossman–Helpman model, assume away the knowledge‐spillovers aspect of FDI. We also present econometric evidence (using industry‐level data from seven OECD nations) that broadly supports the model. Specifically, we find industry‐level scale effects and international knowledge spillovers that are unrelated to FDI, but we also find that bilateral spillovers are boosted by bilateral FDI.