A non-parametric Malmquist index and impulse response approach to decomposing FDI's technical spillover on manufacturing industry in China

There are different technical spillovers channels from direct foreign investment (FDI). Based on a nonparametric Malmquist index approach, this paper has depicted the total factors productivity trend in China's manufacturing industry since the reform and opening, which is decomposed into technical efficiency and technical progress. Impulse response mode is used to dynamically simulate the impact on technical efficiency and technical progress from FDI and causality between the variables. The results indicate that manufacturing industry productivity spillover from FDI is mainly due to the increase of technical efficiency, there is no strong relationship between FDI and technical progress.