FDI Spillovers and Firm Ownership in China: Labor Markets and Backward Linkages
Pacific Basin Working Paper No. 2006
Federal Reserve Bank of San Francisco Working Paper No. 2006-25
38 Pages Posted: 20 Oct 2006
Date Written: August 2006
Abstract
Using firm-level data, we find that the presence of foreign firms in China is positively associated with the performance of domestically owned private firms but is negatively associated with the performance of state-owned enterprises (SOEs). In particular, we find: (1) the presence of foreign direct investment (FDI) is associated with larger differences in the wages and the quality of skilled workers between SOEs and private firms; and, (2) FDI presence is positively associated with private firms' sales to foreign firms and foreign consumers, but not with the sales of SOEs. We argue that these differences could be due to the fact that private firms have more flexible wage and personnel policies, which allows them to attract talent that facilitates positive FDI spillovers.
Keywords: FDI spillovers, institutions, SOE, privatization, China
JEL Classification: L33, F23, O17
Suggested Citation: Suggested Citation
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