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Foreign Direct Investment and Efficiency Benefits: A Conditional Quantile Analysis

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  • Dimelis, Sophia
  • Louri-Dendrinou, Eleni

Abstract

This Paper analyses the production efficiency gains in terms of technology transfer and labour productivity changes caused by diverse degrees of foreign ownership. The analysis is based on a sample of 4056 domestic and foreign manufacturing firms operating in Greece in 1997. Departures from normality of labour productivity and its logarithm led to the adoption of the robust technique of quantile regression as providing a better view of the examined relationships by obtaining estimates at different quantiles. Interesting results include a positive and significant effect of foreign ownership on labour productivity which stems exclusively from full and majority owned affiliates and becomes significant only in the middle quantiles. Productivity spillovers benefiting local firms are also differentiated by degree of foreign ownership, with minority holdings exercising a stronger effect in most quantiles. Such distinct FDI effects stress the importance of policy modifications according to the level of development in the host economy, and the selected objectives.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2868.

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Date of creation: Jun 2001
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Handle: RePEc:cpr:ceprdp:2868

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Keywords: FDI; multinationals; productivity; spillovers;

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  1. Caves, Richard E, 1974. "Multinational Firms, Competition, and Productivity in Host-Country Markets," Economica, London School of Economics and Political Science, vol. 41(162), pages 176-93, May.
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Citations

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Cited by:
  1. Almeida, Rita, 2007. "The labor market effects of foreign owned firms," Journal of International Economics, Elsevier, vol. 72(1), pages 75-96, May.
  2. Ito, Keiko, 2004. "Foreign ownership and plant productivity in the Thai automobile industry in 1996 and 1998: a conditional quantile analysis," Journal of Asian Economics, Elsevier, vol. 15(2), pages 321-353, April.
  3. Pradhan, Jaya Prakash, 2004. "FDI spillovers and local productivity growth: evidence from Indian pharmaceutical industry," MPRA Paper 17080, University Library of Munich, Germany.
  4. Silvana Tordo & Michael Warner & Osmel E. Manzano & Yahya Anouti, 2013. "Local Content in the Oil and Gas Sector," World Bank Publications, The World Bank, number 15930, August.
  5. Sourafel Girma & Holger Görg, 2007. "The Role of the Efficiency Gap for Spillovers from FDI: Evidence from the UK Electronics and Engineering Sectors," Open Economies Review, Springer, vol. 18(2), pages 215-232, April.
  6. Daniel Chudnovsky & Andres Lopez & Gaston Rossi, 2008. "Foreign Direct Investment Spillovers and the Absorptive Capabilities of Domestic Firms in the Argentine Manufacturing Sector (1992-2001)," Journal of Development Studies, Taylor & Francis Journals, vol. 44(5), pages 645-677.
  7. Giovanni Peri & Dieter Urban, 2002. "The Veblen-Gerschenkron Effect of FDI in Mezzogiorno and East Germany," Development Working Papers 164, Centro Studi Luca d\'Agliano, University of Milano.
  8. Sourafel Girma, & Holger Görg, 2003. "Foreign direct investmant, spillovers and absorptive capacity: Evidence from quantile regressions," The Institute for International Integration Studies Discussion Paper Series iiisdp01, IIIS.
  9. Beata Javorcik & Mariana Spatareanu, 2006. "To Share or Not To Share: Does Local Participation Matter for Spillovers from Foreign Direct Investment?," Working Papers Rutgers University, Newark 2006-001, Department of Economics, Rutgers University, Newark.
  10. Görg, Holger & Greenaway, David, 2002. "Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Investment?," CEPR Discussion Papers 3485, C.E.P.R. Discussion Papers.
  11. Uppenberg, Kristian & Riess, Armin, 2004. "Determinants and growth effects of foreign direct investment," EIB Papers 3/2004, European Investment Bank, Economics Department.
  12. Della Temenggung, 2007. "Productivity Spillovers from Foreign Direct Investment: Indonesian Manufacturing Industry’s Experience 1975-2000," DEGIT Conference Papers c012_048, DEGIT, Dynamics, Economic Growth, and International Trade.
  13. Ben Hamida, Lamia & Gugler, Philippe, 2009. "Are there demonstration-related spillovers from FDI?: Evidence from Switzerland," International Business Review, Elsevier, vol. 18(5), pages 494-508, October.

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