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Outward-oriented Development and Productivity: Which Causes and Which Consequences?
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TitleOutward-oriented Development and Productivity: Which Causes and Which Consequences?  
AuthorDai Xiang, Zhang Yu, Zheng Jianghuai and Zhang Erzhen  
OrganizationSchool of Economics, Nanjing University;;; 
Key WordsOutward-oriented Development; Export in Matching with FDI Enterprises; Self-selection;  
AbstractRapid expansion of China’s export and increasing inward FDI are the remarkable characteristics of China’s outward-oriented economy. Based on the practice of co-development between indigenous enterprises and FDI in Kunshan, this paper finds that indigenous enterprises can improve their productivity by matching with FDI enterprises who enter into China with higher productivity. The above phenomena can be called export enterprises’ productivity paradox of developing nations. Behind the phenomena, there is a self-selection mechanism for indigenous enterprises who realize export in matching with FDI enterprises: while foreign enterprises enter into China with higher productivity, indigenous enterprises can realize export by competing for matching with FDI enterprises, which improve indigenous enterprises eventually, and this can be summarized as the essence of China’s outward-oriented economic development. Empirical analysis based on Micro-firm data reveals the above mechanism together with learning by exporting effect and peer group effect helps to improve indigenous enterprises productivity. Complementing with theory that productivity determines enterprises’ outward development, this paper test that improve of productivity is the consequence of enterprises’ outward-oriented development to some extent. In addition, about the peer group effect, there is evidence that improvement of productivity for enterprises which mainly engaging in intermediates depends more on skilled or high quality labor, while enterprises which mainly engaging in capital products and consumable depends more on managerial staff. 
Serial NumberWP282 
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