The effectiveness and externality of China's outward foreign direct investment policy

This paper uses the China Foreign Investment Country-Oriented Industry Catalog as a policy shock to study the effectiveness and externality effect of China's OFDI incentive policy through the RD and PSM-DID model correspondingly. The results show that OFDI encouragement policy can effectively promote enterprises to carry out foreign direct investment. This also has certain externalities that (1) firms participate in OFDI, the promotion of productivity is not significant in the short term, but in the long term the promotion effect increases with time; (2) compared with non-policy-driven OFDI, policy-driven OFDI is more effective; (3) the externality effect show strong heterogeneity on level of the host country's technology, the absorption capacity of home-based firms, and ownership of firms.