TY  - JOUR
AU  - Du,Luosha
AU  - Harrison,Ann
AU  - Jefferson,Gary
TI  - Do Institutions Matter for FDI Spillovers? The Implications of China's "Special Characteristics"
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16767
PY  - 2011
Y2  - February 2011
UR  - http://www.nber.org/papers/w16767
L1  - http://www.nber.org/papers/w16767.pdf
N1  - Author contact info:
Luosha Du
Department of Agricultural
and Resource Economics
UC Berkeley
Giannini Hall
Berkeley, California 94720
E-Mail: luosha@berkeley.edu

Ann Harrison
The Wharton School
University of Pennsylvania
2016 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104-6370
Tel: 215 746 3132
E-Mail: annh@wharton.upenn.edu

Gary H. Jefferson
Brandeis University
Economics Department
Waltham, Ma. 02254
Tel: 781-736-2253
Fax: 781-736-2269
E-Mail: jefferson@brandeis.edu
AB  - A number of recent studies examine productivity spillovers from foreign direct investment (FDI) to China’s domestic industrial enterprises. This study goes further by investigating the implications of institutions for the nature of productivity spillovers during 1998-2007. We examine three institutional features that comprise aspects of China’s “special characteristics”:  (1) the different sources of FDI, where FDI is nearly evenly divided between mostly Organization for Economic Co-operation and Development (OECD) countries and the region known as “Greater China”, consisting of Hong Kong, Taiwan, and Macau; (2) China’s heterogeneous ownership structure, involving state- (SOEs) and non-state owned (non-SOEs) enterprises, firms with foreign equity participation, and non-SOE, domestic firms; and (3) industrial promotion via tariffs or through tax holidays to foreign direct investment. We also explore how productivity spillovers from FDI changed with China’s entry into the WTO in late 2001.  We find robust positive and significant spillovers to domestic firms via backward linkages (the contacts between foreign buyers and local suppliers).  Our results suggest varied success with industrial promotion policies.  Final goods tariffs as well as input tariffs are negatively associated with firm-level productivity.  However, we find that productivity spillovers were higher from foreign firms that paid less than the statutory corporate tax rate.
ER  -