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How Does FDI Affect Productivity at Home?: Evidence from a Plant-Level Analysis

Kazunobu Hayakawa (), Toshiyuki Matsuura () and Kazuyuki Motohashi ()

Journal of Industry, Competition and Trade, 2016, vol. 16, issue 4, No 1, 403-422

Abstract: Abstract This study investigates the effect of foreign direct investments (FDI) on home productivity using plant-level data rather than firm-level data. Our results are consistent with the theoretical predictions. Horizontal FDI (HFDI) does not have a significantly positive effect on home productivity in plants that have the same activities abroad. In contrast, vertical FDI (VFDI) significantly enhances productivity in plants with an input–output relationship with activities relocated abroad. Furthermore, focusing on FDI in East Asia, the productivity improvements at home through VFDI are even greater, which might be caused by significant differences in factor prices between Japan and host countries.

Keywords: Productivity; FDI; Japan; System GMM (search for similar items in EconPapers)
JEL-codes: F23 H32 O53 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s10842-016-0220-5

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