We analyze productivity spillovers from MNC subsidiaries to domestic Romanian companies, both within (horizontal spillovers) and across industries (vertical spillovers). We separate labor market spillovers from other horizontal spillovers and define the supply-backward linkage spillover that runs from foreign investors over domestic suppliers to local users of domestic inputs. In our panel of Romanian firms, labor market effects differ from other horizontal effects, vertical spillovers dominate horizontal spillovers and the newly defined supply-backward spillover is economically and statistically significant. The spillovers studied raise total factor productivity between 20% and 50% in the period 1998-2001, depending on the firm’s initial level of technology.
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