Distribution, Outward FDI, and Productivity Heterogeneity:Evidence from Chinese Firms
Wei Tian   Miaojie Yu
September 2, 2015

Abstract
This is the first paper to examine distribution-oriented outward FDI using Chinese multinational firm-level data. Distribution outward FDI refers to Chinese parent firms in manufacturing that penetrate foreign markets through wholesale trade affiliates that resell exportable goods. Our estimations correct for rare-events bias and show that distribution FDI are more (less) productive than non-FDI (non-distribution FDI) .rms. As cross-border communications costs (transportation costs) increase, there is a higher the probability that firms engage in distribution FDI (non-distribution FDI). Our endogenous income-threshold estimates show that high-productivity Chinese firms invest more in high-income countries, but not necessarily in low-income countries.

JEL: F13, O11, P51

Keywords: Distribution FDI, Firm Productivity, Linder Hypothesis, Rare-Events Corrections, Threshold Estimates

No.E2015003