Working Paper No. 519

Multinationals, Endogenous Growth and Technological Spillovers: Theory and Evidence

Published: April 19, 1999Pages: 25Keywords: MNCs, Economic growth, R&DJEL-codes: F12, O32, O41

Multinationals, Endogenous Growth and Technological Spillovers: Theory and Evidence Richard E. Baldwin, Henrik Braconier and Rikard Forslid


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.

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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