Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 519: Multinationals, Endogenous Growth and Technological Spillovers: Theory and Evidence

Henrik Braconier , Richard E. Baldwin and Rikard Forslid
Additional contact information
Henrik Braconier: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Richard E. Baldwin: Graduate Institute of International Studies, Geneva
Rikard Forslid: Lund University, Postal: P.O. Box 117, SE-221 00 Lund, Sweden

Abstract: FDI has received surprisingly little attention in theoretical and empirical work on openness and growth. This paper presents a theoretical growth model where MNCs directly affect the endogenous growth rate via technological spillovers. This is novel since other endogenous growth models with MNCs, e.g. the Grossman-Helpman model, assume away the knowledge-spillovers aspect of FDI. We also present econometric evidence (using industry-level data from seven OECD nations) that broadly supports the model. Specifically, we find industry-level scale effects and international knowledge spillovers that are unrelated to FDI, but we also find that bilateral spillovers are boosted by bilateral FDI.

Keywords: MNCs; Economic growth; R&D

JEL-codes: F12; O32; O41

25 pages, April 1, 1999

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