Does FDI enhance provincial productivity? A panel data analysis in Vietnam

Linh Huynh, Hien Hoang and Hung Tran

MPRA Paper from University Library of Munich, Germany

Abstract: In the present study, we examine foreign direct investment (FDI)- induced productivity spillovers across 60 Vietnamese provinces from 2000 to 2016. Using a generalized method of moments technique, we find that foreign presence has a positive direct effect on total factor productivity (TFP). Furthermore, we discern a positive association between industrial linkages and productivity spillovers. All these findings remain robust to alternative model specifications. After accounting for the roles of human capital in the FDI–TFP nexus, we find absorptive capacity, as measured by human capital, to be a key factor influencing the nature of the foreign presence–productivity spillover nexus in the host province. Specifically, we observe that better human capital enables provinces to better internalize productivity spillovers from foreign presence. This result lends support to the view that human capital must surpass a critical threshold before the host can realize any productivity spillovers engendered by foreign presence.

Keywords: Foreign direct investment; total factor productivity; human capital; industrial linkage (search for similar items in EconPapers)
JEL-codes: C33 D24 F21 F23 F62 (search for similar items in EconPapers)
Date: 2020, Revised 2021-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of the Asia Pacific Economy 3.28(2023): pp. 1174-1195

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:117620

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