Home Versus Host Country Effects of FDI: Searching for New Evidence of Productivity Spillovers

Priit Vahter () and Jaan Masso

No 2005-13, Bank of Estonia Working Papers from Bank of Estonia

Abstract: The aim of this paper is to study the effects of both inward and outward foreign direct investment (FDI) on productivity. The main novelty is the analysis of the spillover effects of outward FDI that may occur outside the investing firms on the rest of the home country. The effects are addressed both for the manufacturing and services sectors. To our best knowledge there have so far been no studies based on enterprise-level panel data analysing the spillovers of outward FDI in the production function estimation framework. We find that engaging in outward FDI or receiving inward FDI is positively related to the productivity of the parent firm in Estonia or the subsidiary in Estonia. We do not find much evidence of positive spillovers via outward or inward FDI that is robust to the specification of the model or does not depend on the sector being studied. The results on spillover effects vary according to different specifications of the spillover variable, sector or the model, being either statistically insignificant or, in some cases, positive.

Keywords: foreign direct investment; spillovers; home country effects; productivity (search for similar items in EconPapers)
JEL-codes: F10 F21 F23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cis, nep-eff and nep-ifn
Date: 2005-12-10, Revised 2005-12-10
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Related works:
Working Paper: Home versus Host Country Effects of FDI: Searching for New Evidence of Productivity Spillovers (2006)
Journal Article: Home versus Host Country Effects of FDI: Searching for New Evidence of Productivity Spillovers (2007)
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