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

Jonathan Haskel (), Matthew Slaughter and Sonia Pereira

No 3384, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 UK manufacturing from 1973 through 1992. Across a wide range of specifications, we estimate a significantly positive correlation between a domestic plant?s TFP and the foreign-affiliate share of activity in that plant?s industry. This is consistent with positive FDI spillovers. We do not generally find significant effects on plant TFP of the foreign-affiliate share of activity in that plant?s region. Typical estimates suggest that a 10 percentage-point increase in foreign presence in an UK 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. 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.

Keywords: Multinational firms; Foreign direct investment; Productivity spillovers (search for similar items in EconPapers)
JEL-codes: F20 L10 (search for similar items in EconPapers)
Date: 2002-05
New Economics Papers: this item is included in nep-ifn
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Citations: View citations in EconPapers (215)

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Journal Article: Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms? (2007)
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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