nology diffusion and thus persistent productivity externalities among local firms in the host country or if more difficult behind-the-border structural policy reforms are indispensable. Second, it matters for the design of developing FDI policy because it indicates whether it is enough to simply attract the MNE for a limited time (via, for example, a tax holiday) or whether the government must aim to attract and retain foreign firms such as by maintaining low corporate tax rates, strengthening the domestic absorptive capacity, or promoting technology sharing between foreign and local firms (for instance, through joint ventures). Third, if growth spillovers stem primarily from leaning rather than learning effects, FDI-led growth increases a country’s vulnerability to adverse global shocks in that the productivity gains of domestic firms will be partly reversed with the disinvestment of multinational firms.<sup>3</sup> This paper contributes to the existing literature by exploring whether there are asymmetric spillover effects from FDI increases and decreases using Jordanian firm-level data. Jordan is a particularly good example to study (spillover) effects of FDI. First of all Jordan has seen a massive increase in FDI over the last decade cumulating to a share of FDI relative to GDP of 10.1 percent in 2008, becoming one of the most attractive countries for FDI.<sup>4</sup> Furthermore, given the market oriented reforms undertaken, it has also generated sufficient absorptive capacity to take advantage of FDI effects. Our estimates do indeed reveal significant asymmetries between MNE entries and exits which point to significant temporary components to spillovers. We find that FDI in downstream industries (i.e., those that purchase inputs from local firms) are particularly important in generating these transitory leaning effects among local suppliers, with smaller local firms being especially impacted by exiting MNEs. Our results suggest that the significant FDI spillovers to local suppliers in upstream industries which have been found in several developing countries do not necessarily capture persistent learning effects (such as technology transfers) but rather transitory leaning effects reflecting the higher demand for locally sourced goods and services as long as the MNE operates in the country.

Given the large literature on the spillovers from FDI, at this stage it is more useful to point the reader to overviews of the findings rather than specific studies. In particular, Blomstr ̈om and Kokko (1998) provide an discussion of the earlier literature; for more recent coverage, see Irsov ́a and Havr ́anek (2013), Havr ́anek and Irsov ́a (2010), or Wooster and Diebel (2010). From this literature, two broad themes emerge. First, the impact of FDI on local firms hinges on the supply chain relationship between the MNEs and the local firm. As delineated by Rodriguez-Clare (1996), this relationship can be horizontal (with the MNE

> 3See also Gall et al. (2014) on how FDI can increase the long-term vulnerability of countries to external shocks.

> 4Notably, our sample contains, due to the financial crisis, both increases and decreases in foreign ownership

2