Foreign Investments and Productivity Evidence from European Regions

Davide Castellani and Fabio Pieri

No 83/2011, Quaderni del Dipartimento di Economia, Finanza e Statistica from Università di Perugia, Dipartimento Economia

Abstract: Differences in productivity across regions have been mainly attributed to agglomeration economies, technology and human capital, while almost no evidence has been provided on the role of internationalization. In this paper we build unique measures of outward and inward foreign direct investment (FDI) counts at the NUTS 2 level and we assess the relationship between regional productivity and foreign investments in Europe. Regions with larger outflows of foreign investments show higher productivity growth, but this correlation fades down with the number of investments and eventually becomes negative in regions with very high outward orientation. Inward investments are also positively associated with regional productivity growth, but only above a certain threshold. Results are robust to the introduction of a number of regional characteristics, to the control for endogeneity of foreign investments, and for spatial dependence.

Keywords: Regional productivity; foreign investments; Europe; spatial econometric models; instrumental variables. (search for similar items in EconPapers)
JEL-codes: C23 C26 F23 O47 O52 R11 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2011-01-01
New Economics Papers: this item is included in nep-eff, nep-eur, nep-geo, nep-int and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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