Title: Does inward foreign direct investment boost the productivity of domestic firms?
Description: "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"--National Bureau of Economic Research web site.
Subjects: Econometric models, Foreign Invetments, Industrial productivity
Places: Great Britain