FDI And Total Factor Productivity

During recent years, foreign direct investment is playing an increasingly important role in the development of Zhejiang’s economy, Many studies suggest that FDI inflow is not only an important source of economic growth, but also an important driving force of technological progress and improvement of technical efficiency, More and more people have realized that the mode of economic growth in China is unsustainable and promoting total factor productivity c-an achieve Chinese economy’s sustainable growth. Therefore the study of Zhejiang’s current productivity and examining that FDI can promote Zhejiang’s tot-al factor productivity or not are of great Theoretical and Practical significance.Firstly, based on the panel data of Zhejiang’s 11 districts from 2002 to 2-010 and stochastic frontier function (SFA) method, this paper analyses Zhejiang’s technical efficiency, technological progress.total factor productivity and their growth rates, and studies the effect of FDI inflow on technical efficiency, technical progress and total factor productivity. Secondly, we use DEA-malmquist productivity index approach to estimate and decompose the growth rate of total factor productivity and analysis the impact of FDI inflow on technical efficiency and technical progress. We get the conclusions which are consistent with the conclusions based on stochastic frontier function method. According to the empirical results, we put forward some suggestions on how to make better use of FDI.The innovations of this article lie in the first attempt to analysis Zhejiang’s technical efficiency, technological progress, total factor productivity with two methods--stochastic frontier function approach and DEA-malmquist productivity index approach and doing a comparative research.The main research conclusion is:from 2002 to 2010 technical efficiency, technical progress and total factor productivity of Zhejiang province are growing. The technical efficiency of the northeast of Zhejiang is higher than the southwest, but the northeast’s growth rate of technical efficiency is lower than the southwest’s.and FDI inflow can improve the technical efficiency and the technological progress significantly.