A Touch of Sophistication: FDI and Unit Values of Exports

Beata Javorcik and Torfinn Harding

No 7596, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The debate on trade and growth increasingly focuses on the composition of exports. Exports of more "sophisticated" products appear to be positively correlated with growth, and upgrading the quality of exports is high on the policy agenda of many countries. This study presents evidence suggesting that attracting inflows of FDI offers potential for upgrading a country?s export basket. The empirical analysis relates unit values of exports measured at the 4-digit SITC level to data on sectors treated by investment promotion agencies as priority in their efforts to attract FDI. The sample covers 116 countries over the period 1984-2000. The findings are consistent with a positive effect of FDI on unit values of exports in developing countries. However, such a relationship is less evident in developed countries. These results suggest that FDI can help bridge gaps in production and marketing techniques between developing and high income economies.

Keywords: Exports; Fdi; Industrial policy; Investment promotion; Quality; Unit values (search for similar items in EconPapers)
JEL-codes: F10 F21 F23 L52 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-int
References: View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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