%J The Review of Economics and Statistics
%N 3
%X 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. Consistent with spillovers, we estimate a robust and significantly positive correlation between a domestic plant's TFP and the foreign-affiliate share of activity in that plant's industry. 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%. We also use these estimates to calculate the per-job value of these spillovers at about £2,400 in 2000 prices ($4,300). 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.
%V 89
%A J.E. Haskel
%A S. Pereira
%A M. Slaughter
%P 482-496
%O © 2007 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
%T Does inward foreign direct investment boost the productivity of domestic firms?
%L discovery18100
%D 2007