Abstract
Abstract and Key Results This study contributes to the existing literature by empirically investigating the effect of FDI inflows on the aggregate labour productivity of China’s automotive industry. A production function model is developed using a panel data set at sub-sector level. Two statistical models: pooled ordinary least squares model (POLS) and fixed effects model (FES) were used to estimate the influence of foreign direct investment on aggregate labour productivity in the industry. Inward FDI plays a positive role in increasing industrial productivity, implying that the government should continue to encourage inward investment. However the results also suggest that efforts to increase capital intensity and average firm size in the industry will also improve labour productivity.
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