The Effect Of FDI And International Trade On TFP

The effective way to increase total factor productivity is technological progress.Some scholars believe that introduction of technology can improve the growth of TFP,while others think innovation is the effective way. Some studies suggest that developmentof cutting-edge technology not only cost time and money, but also fail easily. But the costof the purchase of technical equipment is much lower. Therefore, the introduction oftechnology is a time-saving and quick way. There are two ways including import andexport trade and FDI to introduce technology. International trade impacts on TFP mainlythrough importing relatively high-tech capital goods or intermediate goods to promotetechnical progress and forcing the domestic innovators to accelerate the rate of innovation.Or by way of exporting and international contacts to obtain new production technologies,new product design and so on. FDI affects TFP mainly through foreign enterprises ofhigher level of technology and productivity bringing direct effects of technologicaladvances, and imitation effect and competitive effects creating indirect effects oftechnological progress. Currently, the research impacting on TFP are from a singleperspective expanding international trade or FDI. According to the theory of spatialeconomic, it is high frequent for spatial location adjacent areas to communicate andcooperate. Therefore, it is very necessary to lead into the space factor when studying FDI,import and export trade impact the growth of TFP.Firstly, this paper sorts out relevant literature and theories, and analyzes theshortcomings of the existing literature.Based on this, it is necessary to consider spacefactor while studying FDI, import and export trade impact on TFP. Secondly, thispaper use the Malmquist inde method based on DEA to estimate TFP in30provincesof China, then analyze the change of TFP during2000-2012and regional gaps of TFP,technological progress and technical efficiency.Thirdly,this paper use Moran I tovalue TFP existing spatial correlation.Based on comprehensive data of30provinces,combining with the independent variables and control variables, this paper adopt amore cutting-edge method called spatial econometric approach to analyse how FDI,import and export trade impact the growth of TFP of30provinces. The resultsshowed that:(1) Total factor productivity of30provinces shows a distinct spatialdependence,and most provinces are high-high type and low-low type.(2) FDI andImport Significantly promotes the growth of TFP, and there is a complementary relationship between the two. While export was no significant effect on the growth ofTFP, and there is a substitution relationship between the FDI and export.(3) R&Dnegatively correlates with total factor productivity.Finally, a number of policyrecommendations to promote the growth of TFP, which is of great significance forsustainable economic growth and common development of China’s provinces.