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Local Institutions, Foreign Direct Investment and Productivity of Domestic Firms
Author(s) -
Hong Junjie,
Sun Xiaonan,
Huang Wei
Publication year - 2016
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12204
Subject(s) - foreign direct investment , productivity , economics , international economics , labour economics , linkage (software) , production (economics) , monetary economics , international trade , business , macroeconomics , biochemistry , chemistry , gene
This paper examines the linkage between foreign direct investment ( FDI ) and the productivity of domestic firms, paying particular attention to local institutions. Using Chinese manufactures from 1998 to 2007, we find strong evidence that FDI negatively affects the productivity of domestic firms. Firm in regions with better institutions suffers more from foreign presence owing to production contraction, labor cost increases and innovation deterrence.