Discussion paper

DP2155 Multinationals, Endogenous Growth and Technological Spillovers: Theory and Evidence

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.

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Citation

Baldwin, R, R Forslid and H Braconier (1999), ‘DP2155 Multinationals, Endogenous Growth and Technological Spillovers: Theory and Evidence‘, CEPR Discussion Paper No. 2155. CEPR Press, Paris & London. https://cepr.org/publications/dp2155