Efficiency Sorting in Foreign Affiliates: Evidence from China

The World Economy, 2015, 38: 568-581

Posted: 18 May 2021

See all articles by Yasheng Chen

Yasheng Chen

Xiamen University

Ying Ge

Independent

Huiwen Lai

Hong Kong Polytechnic University

Qing Liu

Renmin University of China

Date Written: 2015

Abstract

This paper uses a large micro-level data set to investigate the efficiency sorting pattern of foreign affiliates serving different markets. We find systematic differences among the attributes of foreign affiliates serving the local and overseas markets. Affiliates serving only the host country market are the most productive, the most capital-intensive and the most skill-intensive. Affiliates serving only the international market are the most unskilled and labor-intensive, the least efficient, pay the lowest wages and invest least in innovation and advertising. Affiliates serving both markets offer high wages and invest most in innovation and advertising. The results also suggest that the most productive affiliates choose to serve the host country market, whereas the least efficient affiliates target the international market.

Suggested Citation

Chen, Yasheng and Ge, Ying and Lai, Huiwen and Liu, Qing, Efficiency Sorting in Foreign Affiliates: Evidence from China (2015). The World Economy, 2015, 38: 568-581, Available at SSRN: https://ssrn.com/abstract=3846171

Yasheng Chen

Xiamen University

Xiamen, Fujian 361005
China

Ying Ge

Independent ( email )

Huiwen Lai

Hong Kong Polytechnic University ( email )

Hung Hom, Kowloon
Hong Kong

Qing Liu (Contact Author)

Renmin University of China ( email )

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