摘要：The theoretical prediction of Head and Ries ('Heterogeneity and the FDI versus export decision of Japanese manufacturers', 2003, Journal of the Japanese and International Economies, 17: 448-67) is that if the foreign plant is not used to serve the home market, the exporters can be more productive than the foreign direct investors only if the host-country wage is lower than the home-country wage. With unionized labor markets, we show that there always exist situations where the exporters are more productive than the foreign investors even if the host-country wage is higher than the home-country wage. Given the cost of FDI, a higher trade cost and higher bargaining powers of the labor unions make this result more likely.Citation:Arijit Mukherjee and Sugata Marjit, (2009) ''Firm productivity and foreign direct investment: a non-monotonic relationship'', Economics Bulletin, Vol. 29 no.1 pp. 230-237.Submitted:.Nov.18.2008....Published:March 02, 2009..... var currentpos,timer; function initialize() { timer=setInterval("scrollwindow()",10);} function sc(){clearInterval(timer); }function scrollwindow() { currentpos=document.body.scrollTop; window.scroll(0,++currentpos); if (currentpos != document.body.scrollTop) sc();} document.onmousedown=scdocument.ondblclick=initialize11. Introduction Dominance of foreign direct investment (FDI) over international trade (UNCTAD, 2006) has generated a vast theoretical and empirical literature on FDI.1However, the literature is paying attention to the effects of firm-productivity on FDI only in recent years. Helpman et al. (2004) show that the more productive firms do FDI if the reason for FDI is to save trade costs. Head and Ries (2003) show that the more productive firms may prefer export to FDI if the reason for FDI is to get the advantage of a lower wage.2More specifically, their theoretical prediction is that if the foreign plant is not used to serve the home market, the exporters can be more productive than the foreign direct investors only if the host-country wage is lower than the home-country wage. We show that this is not necessarily the case if the labor markets are unionized, which create imperfectly competitive input markets. It is well known that the behavior of the labor unions' affects firms' performance (Flanagan, 1999) and there is an existing literature considering the effects of labor unions on firms' decisions on FDIs (see, Lommerud et al., 2003 and Mukherjee, 2008, for some recent works and the references therein). However, that literature did not focus on the impacts of firm-productivity on FDI. We take up this issue in this paper. In a simple model of FDI with unionized labor markets, we show that there always exist situations where the exporters are more productive than the foreign direct investors even if the host-country wage is higher than the home-country wage. Using symmetric union powers between the countries, we show that, ceteris paribus, a higher trade cost or higher bargaining powers of the unions increase this possibility. Hence, the possibility of higher productivities of the exporters than the foreign investors is more than what demonstrated by Head and Ries (2003), and more empirical works are needed to show the effects of labor market institutions in determining the relationship between firm-productivity and FDI. The remainder of the paper is organized as follows. Section 2 describes the model and shows the results. Section 3 concludes. 2. The model and the results Assume that there is a monopolist foreign firm, which wants to sell a product in a country, called the host country. We assume that the firm can serve the host country either through export or through FDI. If the firm exports, it incurs a transportation cost, t . However, the firm incurs a fixed cost Funder FDI. The inverse market demand function for the product is PAq=., 0A >, (1) where P is price and q is the total output. We consider that labor is the only factor of production, and it is immobile between the countries. Assume that the firm needs λworkers to produce one unit of output. λis the inverse of labor productivity. A lower λimplies higher labor productivity. 1See Saggi (2002) for a recent survey on FDI. 2The empirical evidence on the relationship between firm-productivity and is mixed. Helpman et al. (2004), which is based on a cross-section of the US manufacturing firms, show that foreign investors are more productive than the exporters. Using English individual data, Girma et al. (2005) broadly confirm the finding of Helpman et al. (2004). Considering listed Japanese firms, Head and Ries (2003) show that low productivity firms are most attracted to do FDI in low-cost host countries, thus in contrast to Helpman et al. (2004). Using data on Slovenian firms, Damijan et al. (2004) show that, in general, the Slovenian firms that invest abroad do not have on average higher labor productivity. They support the finding of Helpman et al. (2004), but only for Slovenian FDI in the high-wage countries. Using the same data set, Damijan et al. (2007) found some support that the firms investing in low-income countries have lower average productivity. Greenaway and Kneller (2003) provide a survey of the recent literature on FDI and firm heterogeneity.
