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Foreign direct investment, prices and efficiency: Evidence from India

Nesma Ali and Joel Stiebale

No 2022-10, Discussion Papers from University of Nottingham, GEP

Abstract: This paper uses a rich panel data set of Indian manufacturers to analyze the effects of foreign direct investment (FDI) on domestic firms. Detailed product-level information on prices and quantities allows us to estimate physical productivity and marginal costs. In line with the previous literature, we find little evidence for horizontal spillovers based on commonly used measures of revenue productivity. In contrast, we measure sizable efficiency gains using measures that are not affected by pricing heterogeneity. Our results indicate that domestic firms can benefit from the ability of multinational subsidiaries to produce high-quality products at relatively low costs.

Keywords: Foreign Direct Investment; Spillovers; Productivity; Marginal Costs; Prices; Markups; Multi-Product Firms (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-eff, nep-ifn and nep-int
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Working Paper: Foreign direct investment, prices and efficiency: Evidence from India (2021) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:not:notgep:2022-10

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