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Multinationals, Endogenous Growth and Technological Spillovers: Theory and Evidence

  • Baldwin, Richard
  • Braconier, Henrik
  • Forslid, Rikard

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2155.

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Date of creation: May 1999
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Handle: RePEc:cpr:ceprdp:2155
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