The Research Of Relationship Between Foreign Direct Investment And Total Factor Productivity In Agriculture Industry

After the great policy of China's reform in 1978, the scale of foreign direct investment(FDI) expanded continuously and rapidly. The China's economy has benefited much in the technology improvement. Although the proportion of FDI in agriculture industry(AFDI) is small, its trend of growth shows a steady increase in these years. The restriction stipulated by the government has been reduced gradually. The expenditure of research of AFDI also expanded. Therefore, it is essential to research on the relationship between AFDI and the development of agriculture industry. As the carrier of developed techniques, AFDI's effect on agricultural total factor productivity(ATFP) reasonably has the critical meaning of analysis. FDI does not necessarily act positively on the host country's economy, where the absorptive capacity plays an important role. So we could research further on the utilization of FDI by recognition of impacted factors of absorptive capacity. In this thesis, we research how the AFDI's effect on ATFP varies when rural financial service and rural human capital is set separately as the threshold variable.The main content is arranged as follows:First, we introduce the development of AFDI in China and the contribution of technology improvement of agriculture industry. After that, we review several related theories and literature to get the boundary of the theoretical framework. Because the research we conduct is in the scope of macroeconomics, the related theories include Agricultural Economic theory, Dual Sector economic theory, Economy Growth theory, Foreign Direct Investment theory, Total Factor Productivity theory. After defining several critical terms in our research, we explain the affections on ATFP by AFDI, rural financial services, and rural human capital separately. To actualize the practical meanings of the research, we state the facts and problems of AFDI, rural financial services, and rural human capital. Based on the preparations both of the theory and facts, we construct a threshold model invented by Hansen(1999) to prove how the rural financial service and rural human capital affect the relation between AFDI and ATFP. The results show that dual-threshold effect exists when either rural financial service or rural human capital is set as threshold variable. At last, we state the conclusions, make several suggestions and outlook of the research.Through this research, we can get several conclusions. Threshold effect exists when rural financial service is set as the threshold variable. When the rural financial service is weaker than its lower threshold, AFDI's influence on ATFP is negative. That is to say, when the rural financial service is too weak, ATFP could not get contribution from the AFDI, which mostly happens in several provinces of small agriculture industry. When the rural financial service gets stronger than the lower threshold, the result turns positive and becomes more significant along with its development. Actually, most provinces exceed the higher threshold after several years' development. So it can be concluded that in the course of rural financial service's development, the effect of AFDI on ATFP grows greater. The rural financial service works well for circulating funds and benefits for technology abstraction and diversion.Threshold effect also exists when rural human capital is set as the threshold variable, but it works in a different way. When rural human capital is set as the threshold variable, we can observe that AFDI's influence on ATFP changes from positively to negatively when it passes the lower threshold during its growth, but the effect of AFDI on ATFP is not significant. Dramatically, when it grows larger than the higher threshold, the influence zooms. But this just happens in few provinces. So the conclusion is that in most provinces, the rural human capital in China can not contribute on the AFDI's effect on ATFP. But what's more, from the boosted result in the several provinces over the higher threshold we also can say that improving the rural human capital is the right way to improve the AFDI's effect on ATFP.Fiscal agriculture expenditure still is the main supporting factor for the ATFP growth. It can be said that the improvement of ATFP in China nearly depends on the macroeconomic policy's support. What can be concluded is that the motion of technology improvement of China's agriculture is exogenous, which is not well-adapted to the trend of endogenous modernization development.All these conclusions can support the suggestions that the self-developing ability needs a deep and long-lasting enhancement to support the AFDI's effect on ATFP. In details, AFDI should be chosen cautiously and quality-oriented. Along with the development of our agriculture science R&D, we can utilize more diverse technology from different countries and instruct the FDI to locate at different host areas. For rural financial service, practicability and risk control are the main problem. For rural human capital, we should work hard on improving its quality by education, R&D, technology transformation, and talents introduce. Especially, for rural economy, any activity needs policy support, so in the spillover abstraction, rural economic policy and industries coordination policy are still the critical environment guarantee.