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Outward FDI and Domestic Input Distortions: Evidence from Chinese Firms

Author

Listed:
  • Cheng Chen

    () (University of Hong Kong)

  • Wei Tian

    () (University of International Business and Economics, Beijing)

  • Miaojie Yu

    () (Peking University)

Abstract

This paper examines how domestic distortions a ect firms’ investment strategies abroad. The study first documents puzzling empirical findings concerning Chinese multina- tional corporations, which include that private multinational corporations are less productive than state-owned multinational corporations. A theoretical model is built to rationalize these findings and yields additional empirically consistent predictions. The key insight is that dis- crimination against private firms domestically incentivizes these firms to produce abroad, which results in less tough selection into foreign direct investment for them. A calibra- tion exercise shows the quantitative impacts of domestic distortions on gains in aggregate productivity after investment liberalization.

Suggested Citation

  • Cheng Chen & Wei Tian & Miaojie Yu, "undated". "Outward FDI and Domestic Input Distortions: Evidence from Chinese Firms," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-278, Boston University - Department of Economics.
  • Handle: RePEc:bos:iedwpr:dp-278
    as

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    File URL: http://www.bu.edu/econ/files/2016/04/Cheng-OFDI_Distortion_13Feb2016.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Outward FDI; Multinational Firms; Institutional Distortion; State-owned Enterprises;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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