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Foreign Plants and Industry Productivity: Evidence from Chile

Natalia Ramondo

Scandinavian Journal of Economics, 2009, vol. 111, issue 4, 789-809

Abstract: This paper presents new evidence on foreign plants and their effects on a host industry. I test the predictions of a Melitz‐type model using a panel of domestic and foreign plants in the Chilean manufacturing sector. Foreign ownership is a strong predictor of plant productivity and size advantages. Moreover, productivity gains for a domestic incumbent are positively associated with foreign plants' presence in the same industry and region. I also find a positive correlation between foreign entry and exit of less productive domestic plants, but inconclusive evidence on the effects on productivity of new domestic plants.

Date: 2009
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Handle: RePEc:bla:scandj:v:111:y:2009:i:4:p:789-809