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Efficiency Sorting Among Foreign Affiliates: Evidence From China

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  • Yasheng Chen
  • Ying Ge
  • Huiwen Lai
  • Qing Liu

Abstract

type="main" xml:id="twec12210-abs-0001"> This paper uses a large micro-level data set to investigate the efficiency sorting pattern of foreign affiliates serving different markets. We find systematic differences among the attributes of foreign affiliates serving the local and overseas markets. Affiliates serving only the host country market are the most productive, the most capitalintensive and the most skill-intensive. Affiliates serving only the international market are the most unskilled and labour-intensive, the least efficient, pay the lowest wages and invest least in innovation and advertising. Affiliates serving both markets offer high wages and invest most in innovation and advertising. The results also suggest that the most productive affiliates choose to serve the host country market, whereas the least efficient affiliates target the international market.

Suggested Citation

  • Yasheng Chen & Ying Ge & Huiwen Lai & Qing Liu, 2015. "Efficiency Sorting Among Foreign Affiliates: Evidence From China," The World Economy, Wiley Blackwell, vol. 38(3), pages 568-581, March.
    • Handle: RePEc:bla:worlde:v:38:y:2015:i:3:p:568-581
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    File URL: http://hdl.handle.net/10.1111/twec.2015.38.issue-3
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    Cited by:

    1. Yang, Chih-Hai & Tsou, Meng-Wen, 2022. "Exports and the demand for skilled labor in China: Do foreign ownership and trade type matter?," Economic Modelling, Elsevier, vol. 106(C).
    2. Chih‐Hai Yang, 2021. "Do exporters have markup premiums and why (not)? Evidence from China," The World Economy, Wiley Blackwell, vol. 44(4), pages 956-979, April.

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