Learning or Leaning: Persistent and Transitory Spillovers from FDI

Ronald Davies, Michael Lamla and Marc Schiffbauer

No 201601, Working Papers from School of Economics, University College Dublin

Abstract: Using firm-level data for Jordan, we estimate the extent to which growth spillovers from foreign direct investment (FDI) to local firms stem from persistent learning externalities (i.e., they endure even after foreign investment leaves as knowledge has been transferred to local firms) or from transitory effects (e.g., demand increases which evaporate following disinvestment). We find that they have a significant transitory nature, with employment and capital growth declining when FDI falls, particularly in downstream industries supplied by locals. This suggests that if FDI-attracting policies are intended to promote sustainable growth, it may be more effective to attract and retain FDI via long-term structural policies, for instance, through low corporate tax rates rather than temporary tax holidays or through policies that strengthen the domestic absorptive capacity and linkages between foreign and local firms.

Keywords: FDI; Spillovers (search for similar items in EconPapers)
JEL-codes: F16 F23 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2016-02
New Economics Papers: this item is included in nep-fdg and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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http://hdl.handle.net/10197/7529 First version, 2016 (application/pdf)

Related works:
Working Paper: Learning or Leaning: Persistent and Transitory Spillovers from FDI (2016)
Working Paper: Learning or Leaning: Persistent and Transitory Spillovers from FDI (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:201601

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