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

Jonathan Haskel (), Sonia C. Pereira and Matthew J. Slaughter
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Sonia C. Pereira: University College London
Matthew J. Slaughter: Dartmouth College and NBER

No 452, Working Papers from Queen Mary University of London, School of Economics and Finance

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 U.K. 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 a U.K. industry raises the TFP of that industry's domestic plants by about 0.5 percent. 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: F2 L1 (search for similar items in EconPapers)
Date: 2002-02-01
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Citations: View citations in EconPapers (218)

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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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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:452

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