Abstract
This research investigates the impacts of foreign direct investment (FDI) on a firm’s markups. The data we used is based on the medium and large-sized companies in Taiwan from the TEJ database. We focus on 945 firms during the periods from 1998 to 2009. We adopt Olley and Pakes’ (1996) method to estimate the production function and recover firm productivity. In addition, we adopt the De Loecker’s (2012) method to estimate the markup of each company. The empirical results reveal that firms improve their markup and productivity after undertaking FDI in China.