Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?

Jonathan Haskel (), Sonia C. Pereira and Matthew J. Slaughter
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Sonia C. Pereira: University College London
Matthew J. Slaughter: Tuck School of Business at Dartmouth and NBER

The Review of Economics and Statistics, 2007, vol. 89, issue 3, 482-496

Abstract: Are there productivity spillovers from FDI to domestic firms, and, if so, how much should host countries be willing to pay to attract FDI? To examine these questions, we use a plant-level panel covering U.K. manufacturing from 1973 through 1992. Consistent with spillovers, we estimate a robust and significantly positive correlation between a domestic plant's TFP and the foreign-affiliate share of activity in that plant's industry. Typical estimates suggest that a 10-percentage-point increase in foreign presence in a U.K. industry raises the TFP of that industry's domestic plants by about 0.5%. We also use these estimates to calculate the per-job value of these spillovers at about £2,400 in 2000 prices ($4,300). These calculated values appear to be less than per-job incentives governments have granted in recent high-profile cases, in some cases several times less. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2007
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Working Paper: Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms? (2002)
Working Paper: Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms? (2002)
Working Paper: Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms? (2002)
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