Productivity Spillover Effect of Foreign Direct Investment into Korea

28 Pages Posted: 27 Nov 2017

See all articles by Hyuk-Hwang Kim

Hyuk-Hwang Kim

Korea Institute for International Economic Policy

June Dong Kim

Korea Institute for International Economic Policy

Date Written: December 31, 2010

Abstract

This paper aims at analyzing the FDI spillover effect in accordance to the industrial forward and backward linkages effect during the entire (1990~2008) and recent (2001~2008) periods. The System Generalized Method of Moment has been utilized in order to solve the endogeneity issue. As a result, spillover effect within the industry has been diminishing recently consequently leading to the presence of backward linkage effect but no forward linkage effect. According to the system GMM result, the backward linkage effect in the manufacturing and services sector has increased more recently. Also, the backward linkage effect in the service sector is increasing further than that of the manufacturing sector. The analysis concludes that it is meaningful to note the importance of attracting FDI to the service sector as it results in greater spillover effect than in other sectors.

Keywords: Foreign Direct Investment (FDI), Forward and Backward Linkages Effect, System Generalized Method of Moment

JEL Classification: F21, F23

Suggested Citation

Kim, Hyuk-Hwang and Kim, June Dong, Productivity Spillover Effect of Foreign Direct Investment into Korea (December 31, 2010). East Asian Economic Review, Vol. 14, No. 2, pp. 21-46, December 2010. Available at SSRN: https://ssrn.com/abstract=3076736 or http://dx.doi.org/10.2139/ssrn.3076736

Hyuk-Hwang Kim (Contact Author)

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

June Dong Kim

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

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