%A William M. Tracy %T Industry Mix and Curvilinear Spillovers from FDI in China %0 Journal Article %D 2013 %J Front. Econ. China %J Frontiers of Economics in China %@ 1673-3444 %R 10.3868/s060-002-013-0027-9 %P 535-551 %V 8 %N 4 %U {https://journal.hep.com.cn/fec/EN/10.3868/s060-002-013-0027-9 %8 %X

This paper uses industry and province specific Chinese industrial data to demonstrate a potential causal link between two strands of the FDI literature. The first strand suggests that the impact of spillovers from inward FDI is less robust in middle-income economies than in either high-income or low-income economies. The second strand suggests diminishing returns of inward FDI on horizontal labor productivity in low-technology industries but not in high-technology industries. This paper suggests a link between these two phenomena. Specifically, if both FDI intensity and industry mix vary with the level of economic development, then an industry-dependent relationship between inward FDI and horizontal spillovers could cause middle-income economies to derive fewer benefits from inward FDI than either high- or low-income economies. This paper also verifies the curvilinear relationship between FDI in low-technology industries and horizontal labor productivity without relying on problematic FDI from Hong Kong, Taiwan and Macao.