chapter  7
22 Pages

A benchmark CGE model for the Chinese economy and its extensions

Introduction This book on the productivity spillover effects of FDI in China is concerned with a static single-country CGE model with 101 sectors. The basic framework of the benchmark model will be discussed first. Three extensions to the benchmark model are also presented. In the first extension, endogenous variables are constructed to capture the FDI productivity spillovers. FDI productivity spillover parameters are estimated by econometric analysis. The second extension incorporates monopolistic competition into the CGE model with FDI spillovers. Then the model is further extended to examine the effects of FDI spillovers under monopolistic competition among firms with heterogeneous productivity.