Productivity Spillovers from Multinational Corporations in Portugal: Vulnerability to Deficient Estimation
Isabel Maria Dias Proenca
Technical University of Lisbon (UTL) - School of Economics and Management
Maria Paula Fontoura
Technical University of Lisbon (UTL) - Department of Economics; UECE - Research Unit on Complexity in Economics
Technical University of Lisbon (UTL) - Department of Economics
August 20, 2008
Applied Econometrics and International Development, Vol. 6, No. 1, 2006
Evidence on productivity spillovers from FDI to domestic firms is ambiguous. Incorrect estimation procedures may be one of the sources for the contradictory results obtained in empirical studies on this subject. We observe that inadequacy of the estimation procedures leads to a severe underestimation of the spillover effect. An appropriated econometric methodology is discussed taking into consideration the possible simultaneity of FDI and other explanatory variables and endogeneity related to firm unobserved heterogeneity. Robust inference is also addressed. Our findings for the Portuguese case seem sufficient clear to warn about spillover results obtained with a non-judicious application of the classical panel data methods.
Number of Pages in PDF File: 12
Keywords: Domestic firm productivity, Multinational corporation, Technological spillovers, Panel data, Extended GMM, Portugal
JEL Classification: F21, F23, O52
Date posted: August 20, 2008
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