Openness, human capital and total factor productivity: evidence from China

Abstract

This paper examines the drivers behind China's economic growth. In particular, it focuses on the channels of knowledge spillovers: human capital and openness to trade and foreign direct investment. The specific features of the study include using the most recent comprehensive panel data consisting of 29 provinces during the period 1994-2006 and performing unit root and cointegration tests in the panel data framework. The paper finds that human capital, trade and FDI are the significant determinants of total factor productivity, but their importance varies with technological levels of provinces. These findings have important policy implications.openness, human capital, economic growth, panel data,

Regional analysis of the impact of inward foreign direct investment on economic growth in the Chinese electronic industry

“…The varying impacts of FDI via the three channels on economic growth across regions in China further highlights the importance of locational factors in influencing economic growth in the CEI. These findings are similar to that of Liu and Wang (2003) for China, who found that locational factors are necessary for enhancing FDI spillover effects on economic growth, and Xu et al (2008) who concluded that FDI yields distinct effects on economic growth across different regions in China. Overall, the empirical results indicate that foreign capital has a positive impact on economic growth across the coastal, central and western regions in China.…”

“…Although the theoretical literature predicts that FDI inflows could create knowledge and productivity spillover for the FDI-recipient country, the empirical evidence on the FDI-growth nexus is rather mixed. Many researchers attribute the mixed results to differences in absorptive capacity across FDI-recipient economies (see Todo and Miyamoto, 2006;Liu and Buck, 2007;Kuo and Yang, 2008;Xu et al, 2008). For Chen et al (2011), the effect of FDI spillover effects on economic growth in a country depends on the interaction between foreign firms and domestic ones.…”

“…The growing importance of FDI lies in its ability to facilitate frictionless movement of factors of production across regions, thus serving as a vehicle for cross-border capital and knowledge flows (Singh, 2005). Despite this, empirical evidence of the impact of FDI on economic growth appears mixed (see Liu, 2002;Liu et al, 2002;Liu and Wang, 2003;Girma and Wakelin, 2007;Beugelsdijk et al, 2008;Xu et al, 2008;Xie and Wang, 2009;Zhao and Zhang, 2010;Chen et al, 2011). Azman-Saini et al (2010) attribute the mixed results to the heterogeneity of locational characteristics of host countries which in turn impacts on their ability to attract and utilize FDI inflows to promote economic growth.…”

“…Fu (2008) 31 provinces, 1998-2004 A significant positive impact of FDI on the regional innovation capability, but the impacting degree varies across provinces in relation to the availability of innovative-complementary assets. Xu et al (2008Xu et al ( ) 29 provinces, 1994Xu et al ( -2006 Positive FDI spillover effects on local productivity, but with varying degrees of impact in relation to technological levels of provinces. Tian et al (2011Tian et al ( ) 36 220 domestic firms, 1996 FDI inflows adversely affected the productivity of firms in less-developed noncoastal regions and contributed to the widening regional disparities.…”

Structural Change and Productivity Growth in India and the People's Republic of China

“…The coefficients of all alternative measures of human capital are strongly statistically significant in all of the regressions. The findings of this study align with several earlier findings (Welch 1970;Schultz 1975;Romer 1990;Benhabib et al 1992;Miller and Upadhyaya 2000;Goldar et al 2003;Siddharthan and Lal 2003;Apergis et al 2008;Xu et al 2008;Kathuria 2013). Country-specific studies-such as Kathuria (2013) (for India), and Xu et al (2008) and Wei and Hao (2011) (for the PRC)-prove that human capital is a crucial factor of productivity growth.…”