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Foreign direct investment in services and manufacturing productivity: Evidence for Chile

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  • Fernandes, Ana M.
  • Paunov, Caroline

Abstract

This paper examines the impact of substantial foreign direct investment (FDI) inflows in producer service sectors on the total factor productivity (TFP) of Chilean manufacturing firms. Positive effects are obtained in firm fixed effects instrumental variables regressions and show that forward linkages from FDI in services explain 7% of the observed increase in Chile's manufacturing users' TFP. Our findings also suggest that service FDI fosters innovation activities in manufacturing. Moreover, we show that service FDI offers opportunities for laggard firms to catch up with industry leaders.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 97 (2012)
Issue (Month): 2 ()
Pages: 305-321

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Handle: RePEc:eee:deveco:v:97:y:2012:i:2:p:305-321

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Web page: http://www.elsevier.com/locate/devec

Related research

Keywords: Total factor productivity; Service liberalization; Foreign direct investment; Chile; Firm heterogeneity;

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References

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Citations

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Cited by:
  1. Carson, Matthew, 2010. "Guiding structural change : the role of government in development," ILO Working Papers 455097, International Labour Organization.
  2. Anwar, Sajid & Nguyen, Lan Phi, 2014. "Is foreign direct investment productive? A case study of the regions of Vietnam," Journal of Business Research, Elsevier, vol. 67(7), pages 1376-1387.
  3. Duggan, Victor & Rahardja, Sjamsu & Varela, Gonzalo, 2013. "Can Open Service Sector FDI Policy Enhance Manufacturing Productivity? Evidence from Indonesia," World Bank - Economic Premise, The World Bank, issue 106, pages 1-7, February.
  4. Bianka Dettmer, 2012. "Business services outsourcing and economic growth: Evidence from a dynamic panel data approach," Jena Economic Research Papers 2012-049, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  5. Christen, Elisabeth & Francois, Joseph & Hoekman, Bernard, 2013. "Computable General Equilibrium Modeling of Market Access in Services," Handbook of Computable General Equilibrium Modeling, Elsevier.
  6. Bas, Maria & Causa, Orsetta, 2013. "Trade and product market policies in upstream sectors and productivity in downstream sectors: Firm-level evidence from China," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 843-862.
  7. Maria Bas, 2013. "Does Services Liberalization Affect Manufacturing Firms' Export Performance? Evidence from India," Working Papers 2013-17, CEPII research center.
  8. Shepotylo, Oleksandr & Vakhitov, Volodymyr, 2012. "Services liberalization and productivity of manufacturing firms : evidence from Ukraine," Policy Research Working Paper Series 5944, The World Bank.
  9. Shepotylo Oleksandr & Vakhitov Volodymyr, 2012. "Impact of services liberalization on productivity of manufacturing firms: evidence from Ukrainian firm-level data," EERC Working Paper Series 12/01e, EERC Research Network, Russia and CIS.
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  12. Tarr, David, 2012. "Impact of services liberalization on industry productivity, exports and development : six empirical studies in the transition countries," Policy Research Working Paper Series 6023, The World Bank.
  13. Tarr, David G., 2012. "Putting services and foreign direct investment with endogenous productivity effects in computable general equilibrium models," Policy Research Working Paper Series 6012, The World Bank.
  14. Fernandes, Ana M. & Paunov, Caroline, 2012. "The risks of innovation : are innovating firms less likely to die ?," Policy Research Working Paper Series 6103, The World Bank.

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