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Capital Inflow and Technical Efficiency: A Comparative Analysis between India and China

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  • Renu Bansal

Abstract

This article empirically investigates the impact of foreign direct investment (FDI) on the technical efficiency of manufacturing firms in India and China. We apply the first-stage, stochastic frontier analysis (SFA), to the translog production frontier. The first-stage method estimates simultaneously consider exogenous technical efficiency determinants and translog production function factors. We take foreign ownership and foreign inputs as exogenous determinants of technical efficiency with control variables and foreign technology input in the production frontier. Empirical results find that foreign technology shifts the production frontier by enhancing productivity for Chinese firms, not for Indian firms. Furthermore, domestic firms which use foreign inputs and foreign firms are more efficient. JEL Classification: F14, O31, O32

Suggested Citation

  • Renu Bansal, 2025. "Capital Inflow and Technical Efficiency: A Comparative Analysis between India and China," Journal of Asian Economic Integration, , vol. 7(1), pages 7-24, April.
    • Handle: RePEc:sae:jfasei:v:7:y:2025:i:1:p:7-24
    DOI: 10.1177/26316846241266709
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    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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