When Does FDI Have Positive Spillovers? Evidence from 17 Transition Market Economies

45 Pages Posted: 28 Dec 2013

See all articles by Yuriy Gorodnichenko

Yuriy Gorodnichenko

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA; CEPR; IZA; CERGE-EI; University of Ljubljana

Katherine Terrell

Stephen M. Ross School of Business at the University of Michigan; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Gerald R. Ford School of Public Policy

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Abstract

We use rich firm-level data and national input-output tables from 17 countries over the 2002-2005 period to test new and existing hypotheses about the impact of foreign direct investment (FDI) on the efficiency of domestic firms in the host country (i.e., spillovers). We document that backward linkages have a consistently positive effect on productivity of domestic firms while horizontal and forward linkages show no consistent effect. We also examine how the strength of spillovers varies by sector, FDI source, business environment (corruption, red tape, level of development), firm's distance to the technological frontier, education of workers, and other firm- and country-specific characteristics.

Keywords: FDI, spillovers, transition economies, efficiency

JEL Classification: F23, M16, O16, P23

Suggested Citation

Gorodnichenko, Yuriy and Svejnar, Jan and Terrell, Katherine, When Does FDI Have Positive Spillovers? Evidence from 17 Transition Market Economies. IZA Discussion Paper No. 7824, Available at SSRN: https://ssrn.com/abstract=2372533 or http://dx.doi.org/10.2139/ssrn.2372533

Yuriy Gorodnichenko (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

HOME PAGE: http://www.econ.berkeley.edu/~ygorodni/index.htm

National Bureau of Economic Research (NBER) ( email )

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IZA Institute of Labor Economics ( email )

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Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA ( email )

420 West 118th Street
New York, NY 10027
United States

CEPR

London
United Kingdom

IZA

P.O. Box 7240
Bonn, D-53072
Germany

CERGE-EI

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University of Ljubljana ( email )

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Slovenia

Katherine Terrell

Stephen M. Ross School of Business at the University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Gerald R. Ford School of Public Policy ( email )

735 South State Street, Weill Hall
Ann Arbor, MI 48109
United States

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