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Multinationals, Endogenous Growth and Technological Spillovers: Theory and Evidence

  • Braconier, Henrik

    (The Research Institute of Industrial Economics)

  • Baldwin, Richard E.

    (Graduate Institute of International Studies, Geneva)

  • Forslid, Rikard

    (Lund University)

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 Research Institute of Industrial Economics in its series Working Paper Series with number 519.

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Length: 25 pages
Date of creation: 01 Apr 1999
Date of revision:
Handle: RePEc:hhs:iuiwop:0519
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
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  1. David L. Carr & James R. Markusen & Keith E. Maskus, 2001. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," American Economic Review, American Economic Association, vol. 91(3), pages 693-708, June.
  2. Harrison, Ann, 1991. "Openness and growth : a time series, cross-country analysis for developing countries," Policy Research Working Paper Series 809, The World Bank.
  3. Blomstrom, Magnus & Kokko, Ari, 1998. " Multinational Corporations and Spillovers," Journal of Economic Surveys, Wiley Blackwell, vol. 12(3), pages 247-77, July.
  4. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
  5. David T. Coe & Reza Moghadam, 1993. "Capital and Trade as Engines of Growth in France: An Application of Johansen's Cointegration Methodology," IMF Staff Papers, Palgrave Macmillan, vol. 40(3), pages 542-566, September.
  6. Markusen, James R. & Venables, Anthony J. & Eby Konan, Denise & Zhang, Kevin H., 1996. "A Unified Treatment of Horizontal Direct Investment, Vertical Direct Investment, and the Pattern of Trade in Goods and Services," Working Paper Series 465, Research Institute of Industrial Economics.
  7. Richard E. Baldwin & Elena Seghezza, 1996. "Trade-Induced Investment-led Growth," NBER Working Papers 5582, National Bureau of Economic Research, Inc.
  8. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "International Trade with Endogenous Technological Change," NBER Working Papers 3594, National Bureau of Economic Research, Inc.
  9. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
  10. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  11. Grossman, Gene M. & Helpman, Elhanan, 1995. "Technology and trade," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 25, pages 1279-1337 Elsevier.
  12. Wolfgang Keller, 1997. "Are International R&D Spillovers Trade-Related? Analyzing Spillovers Among Randomly Matched Trade Partners," NBER Working Papers 6065, National Bureau of Economic Research, Inc.
  13. Steven Globerman, 1979. "Foreign Direct Investment and `Spillover' Efficiency Benefits in Canadian Manufacturing Industries," Canadian Journal of Economics, Canadian Economics Association, vol. 12(1), pages 42-56, February.
  14. Horstmann, Ignatius J & Markusen, James R, 1987. "Strategic Investments and the Development of Multinationals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 109-21, February.
  15. Feenstra, R.C., 1990. "Trade And Uneven Growth," Papers 353, California Davis - Institute of Governmental Affairs.
  16. Braconier, Henrik & Sjöholm, Fredrik, 1997. "National and International Spillovers from R&D: Comparing a Neoclassical and an Endogenous Growth Approach," SSE/EFI Working Paper Series in Economics and Finance 211, Stockholm School of Economics.
  17. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  18. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
  19. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  20. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
  21. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  22. S. Lael Brainard, 1993. "An Empirical Assessment of the Proximity-Concentration Tradeoff between Multinational Sales and Trade," NBER Working Papers 4580, National Bureau of Economic Research, Inc.
  23. Ignatius J. Horstmann & James R. Markusen, 1990. "Endogenous Market Structures in International Trade," NBER Working Papers 3283, National Bureau of Economic Research, Inc.
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