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Outward FDI and Domestic Input Distortions: Evidence from Chinese Firms

In: Outward Foreign Direct Investment of Chinese Enterprises

Author

Listed:
  • Wei Tian

    (Peking University)

  • Miaojie Yu

    (Liaoning University)

Abstract

We examine how domestic distortions affect firms’ production strategies abroad by documenting two puzzling findings using Chinese firm-level data of manufacturing firms. First, private multinational corporations (MNCs) are less productive than state-owned MNCs, but they are more productive than state-owned enterprises overall. Second, there are disproportionately fewer state-owned MNCs than private MNCs. We build a model to rationalize these findings by showing that discrimination against private firms domestically incentivizes them to produce abroad. The model shows that selection reversal is more pronounced in industries with more severe discrimination against private firms, which receives empirical support.

Suggested Citation

  • Wei Tian & Miaojie Yu, 2022. "Outward FDI and Domestic Input Distortions: Evidence from Chinese Firms," Contributions to Economics, in: Outward Foreign Direct Investment of Chinese Enterprises, chapter 0, pages 81-123, Springer.
    • Handle: RePEc:spr:conchp:978-981-19-4719-3_4
    DOI: 10.1007/978-981-19-4719-3_4
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