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Quantifying Productivity Gains from Foreign Investment

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Author Info

  • Christian Fons-Rosen

    (Universitat Pompeu Fabra and Barcelona Graduate School of Economics)

  • Sebnem Kalemli-Ozcan

    (University of Maryland, CEPR, and NBER)

  • Bent E. Sorensen

    (University of Houston and CEPR)

  • Carolina Villegas-Sanchez

    (ESADE - Universitat Ramon Llull)

  • Vadym Volosovych

    (Erasmus University Rotterdam and ERIM Research Institute of Management)

Abstract

We quantify the causal effect of foreign investment on total factor productivity (TFP) using a new global firm-level database. Our identification strategy relies on exploiting the difference in the amount of foreign investment by financial and industrial investors and simultaneously controlling for unobservable firm and country-sector-year factors. Using our well identified firm level estimates for the direct effect of foreign ownership on acquired firms and for the spillover effects on domestic firms, we calculate the aggregate impact of foreign investment on country-level productivity growth and find it to be very small.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 13-058/IV.

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Date of creation: 11 Apr 2013
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Handle: RePEc:dgr:uvatin:20130058

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Web page: http://www.tinbergen.nl

Related research

Keywords: Multinationals; FDI; Knowledge Spillovers; Selection; Productivity;

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  1. Wooldridge, Jeffrey M., 2009. "On estimating firm-level production functions using proxy variables to control for unobservables," Economics Letters, Elsevier, Elsevier, vol. 104(3), pages 112-114, September.
  2. Mathias M. Siems & Michael C. Schouten, 2009. "The Evolution of Ownership Disclosure Rules across Countries," ESRC Centre for Business Research - Working Papers, ESRC Centre for Business Research wp393, ESRC Centre for Business Research.
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Cited by:
  1. Sanfilippo , Marco, 2013. "Investing abroad from the bottom of the productivity ladder – BRICS multinationals in Europe," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 26/2013, Bank of Finland, Institute for Economies in Transition.

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