Do Chinese Foreign Investment Enterprises Have Higher Markup — The Empirical Evidence from Manufacturing Enterprises
Abstract Although lots of researches have confirmed the self-selection effect in the foreign investment market with the firm productivity, they all ignored the importance of product pricing. Therefore, based on the enterprises’ markup ratio, this articlecombines production efficiency and product pricingability into a unified analysis index to give a comprehensive test about the "self-selection effect" of Chineseforeign investmentmarket, and further investigated its productivity advantages and product pricing advantage.We find that foreign investment enterprises always have higher markup than non-foreign investment enterprises and the higher markup corresponding to larger investment scale. In addition to the productivity efficiency, further study finds that product pricing also plays an important role in the decision of foreign investment.
This paper is published in Journal of International Trade, No.12, 2016.