Working Paper: CEPR ID: DP2155
Authors: Richard E. Baldwin; Henrik Braconier; Rikard Forslid
Abstract: 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.
Keywords: multinationals; spillovers; endogenous growth; technology transfer
JEL Codes: F1; F2; F23; F43; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| MNCs (F23) | endogenous growth rate (O40) |
| FDI (F23) | productivity growth (O49) |
| MNCs (F23) | technology spillovers (O33) |
| FDI (F23) | technology transfer (O33) |
| bilateral FDI (F23) | knowledge spillovers (O36) |
| MNCs (F23) | productivity in host countries (O57) |
| larger industries (L69) | benefit from FDI-related spillovers (F23) |