Three Essays on the Impact of Openness, FDI and Business Law on Economic Growth

Download or read book Three Essays on the Impact of Openness, FDI and Business Law on Economic Growth written by Ha Yan Lee and published by . This book was released on 2008 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt: (Cont.) The endogenous nature of FDI and productivity growth presents an obstacle for estimating the impact of one on the other, and lead to biased results from the standard econometric models when use for establishing a causal relationship. However, the endogeneity problem can be overcome by the use of a valid instrument. This paper uses the Chinese government's FDI policy shift of the early 1990s as an instrument for the Chinese FDI in a 2SLS analysis. The results indicate that an increase in the level of FDI as a share of existing capital stock causes an increase in the growth rate of productivity, and that foreign capital is far more productive than domestic capital even after controlling for the province fixed-effects.