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A note on labour productivity and foreign inward direct investment

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  • Peter Egger
  • Michael Pfaffermayr

Abstract

Foreign direct investment (FDI) is not only a transfer of capital, but a complex bundle of capital and firm-specific assets. In particular, the transfer of production know-how improves overall productivity of FDI-receiving firms and to some extent also that of the other firms due to spillovers. The present note uses a small panel of Austrian manufacturing sectors and investigates this hypothesis empirically. In a flexible CES-framework, general and labour-augmenting productivity improving effects of inward FDI are found. Thus, the job creation potential of FDI highlighted in previous studies is likely to be overestimated.

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  • Peter Egger & Michael Pfaffermayr, 2001. "A note on labour productivity and foreign inward direct investment," Applied Economics Letters, Taylor & Francis Journals, vol. 8(4), pages 229-232.
    • Handle: RePEc:taf:apeclt:v:8:y:2001:i:4:p:229-232
    DOI: 10.1080/135048501750103917
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    1. Keller, Wolfgang, 2000. "Do Trade Patterns and Technology Flows Affect Productivity Growth?," The World Bank Economic Review, World Bank, vol. 14(1), pages 17-47, January.
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    3. Djankov, Simeon & Hoekman, Bernard, 1998. "Avenues of Technology Transfer: Foreign Investment and Productivity Change in the Czech Republic," CEPR Discussion Papers 1883, C.E.P.R. Discussion Papers.
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    1. Raquel Díaz Vázquez, 2003. "La globalización, inversión extranjera y desigualdades regionales," Revista de Economía Crítica, Asociación de Economía Crítica, vol. 1, pages 229-256.
    2. Kaitila, Ville, 2007. "Free Trade between the EU and Russia - Sectoral Effects and Impacts on Northwest Russia," Discussion Papers 1087, The Research Institute of the Finnish Economy.
    3. Anagaw Derseh Mebratie & Peter A. G. van Bergeijk, 2013. "Firm heterogeneity and development: A meta-analysis of FDI productivity spillovers," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(1), pages 53-74, February.
    4. Michael Hübler & Alexander Glas, 2014. "The Energy-Bias of North–South Technology Spillovers: A Global, Bilateral, Bisectoral Trade Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 59-89, May.
    5. MOUSSIR Charaf-Eddine & LIOUAEDDINE Mariem, 2023. "Foreign Direct Investment, Foreign Certification And Firm Performance In Morocco: Evidence From The World Bank Enterprise Survey," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 18(3), pages 198-213, December.
    6. Adugna Lemi, 2004. "Foreign Direct Investment, Host Country Productivity And Export: The Case Of U.S. And Japanese Multinational Affiliates," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 29(1), pages 163-187, June.
    7. Jen‐Chung Mei, 2023. "Foreign direct investment and relative capacity: Theory and evidence," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(4), pages 1175-1214, October.
    8. Peter J. Buckley & Jeremy Clegg & Ping Zheng & Pamela A. Siler & Gianluigi Giorgioni, 2007. "The impact of foreign direct investment on the productivity of China’s automotive industry," Management International Review, Springer, vol. 47(5), pages 707-724, September.
    9. Winfried Ruigrok & Hardy Wagner, 2005. "Internationale Standortverlagerung und Mitarbeiterproduktivität: Eine empirische Untersuchung deutscher Industrieunternehmen," Schmalenbach Journal of Business Research, Springer, vol. 57(4), pages 310-324, June.
    10. Thomas Habanabakize & Zandri Dickason-Koekemoer, 2023. "Investment, Exchange Rate and Exports Nexus within the South African Automotive Industry," International Journal of Economics and Financial Issues, Econjournals, vol. 13(3), pages 178-184, May.
    11. Raquel Díaz, 2004. "Foreign direct investment and regional convergence: an international approach," ERSA conference papers ersa04p374, European Regional Science Association.
    12. Michael Peneder & Karl Aiginger & Gernot Hutschenreiter & Markus Marterbauer, 2001. "Structural Change and Economic Growth," WIFO Studies, WIFO, number 20668, April.

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