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Panel Data Evidence on Productivity Spillovers from Foreign Direct Investment: Firm-Level Measures of Backward and Forward Linkages

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    Abstract

    I examine whether foreign direct investment increases the productivity of manufacturing firms. I test the proposition that local firms benefit from supplying multinational firms (spillovers through backward linkages) and by purchasing inputs from multinationals (spillovers through forward linkages). The existing literature on productivity spillovers has relied on industry-level proxies for spillovers. I identify spillovers directly at the firm level. I have conducted field work in the Czech manufacturing sector and built a unique data set that enabled me to construct firm-level measures of backward and forward linkages. My results provide strong support for the existence of productivity spillovers through backward linkages.

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    File URL: http://ies.fsv.cuni.cz/default/file/download/id/13828
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    Bibliographic Info

    Paper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 2010/19.

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    Length: 48pages
    Date of creation: Aug 2010
    Date of revision: Aug 2010
    Handle: RePEc:fau:wpaper:wp2010_19

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    Keywords: FDI; spillovers; forward–backward linkages;

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    1. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
    2. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
    3. Blalock, Garrick & Gertler, Paul J., 2008. "Welfare gains from Foreign Direct Investment through technology transfer to local suppliers," Journal of International Economics, Elsevier, vol. 74(2), pages 402-421, March.
    4. Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, vol. 42(1), pages 51-74, October.
    5. Blalock, Garrick & Gertler, Paul J., 2004. "Learning from exporting revisited in a less developed setting," Journal of Development Economics, Elsevier, vol. 75(2), pages 397-416, December.
    6. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
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