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Does inward foreign direct investment boost the productivity of domestic firms?

Haskel, J.E.; Pereira, S.; Slaughter, M.; (2007) Does inward foreign direct investment boost the productivity of domestic firms? The Review of Economics and Statistics , 89 (3) pp. 482-496. 10.1162/rest.89.3.482. Green open access

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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. 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.

Type: Article
Title: Does inward foreign direct investment boost the productivity of domestic firms?
Open access status: An open access version is available from UCL Discovery
DOI: 10.1162/rest.89.3.482
Publisher version: http://dx.doi.org/10.1162/rest.89.3.482
Language: English
Additional information: © 2007 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/18100
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