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Multinationals, Endogenous Growth, and Technological Spillovers: Theory and Evidence

  • Richard Baldwin
  • Henrik Braconier
  • Rikard Forslid

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. Copyright 2005 International Monetary Fund.

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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 13 (2005)
Issue (Month): 5 (November)
Pages: 945-963

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Handle: RePEc:bla:reviec:v:13:y:2005:i:5:p:945-963
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