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Foreign Investments and Productivity Evidence from European Regions

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  • Davide Castellani
  • Fabio Pieri

Abstract

Differences in productivity across regions have been mainly attributed to agglomeration economies, technology and human capital, while almost no evidence has been provided on the role of internationalization. In this paper we build unique measures of outward and inward foreign direct investment (FDI) counts at the NUTS 2 level and we assess the relationship between regional productivity and foreign investments in Europe. Regions with larger outflows of foreign investments show higher productivity growth, but this correlation fades down with the number of investments and eventually becomes negative in regions with very high outward orientation. Inward investments are also positively associated with regional productivity growth, but only above a certain threshold. Results are robust to the introduction of a number of regional characteristics, to the control for endogeneity of foreign investments, and for spatial dependence.

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Bibliographic Info

Paper provided by Università di Perugia, Dipartimento Economia, Finanza e Statistica in its series Quaderni del Dipartimento di Economia, Finanza e Statistica with number 83/2011.

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Length: 34 pages
Date of creation: 01 Jan 2011
Date of revision:
Handle: RePEc:pia:wpaper:83/2011

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Keywords: Regional productivity; foreign investments; Europe; spatial econometric models; instrumental variables.;

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References

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Cited by:
  1. Stefano Herzel & Marco Nicolosi & Catalin Starica, 2011. "The cost of sustainability on optimal portfolio choices," Quaderni del Dipartimento di Economia, Finanza e Statistica 84/2011, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  2. Davide Castellani & Fabio Pieri, 2011. "R&D Offshoring and the Productivity Growth of European Regions," Working Papers 1120, Department of Applied Economics II, Universidad de Valencia.
  3. Mirella Damiani & Fabrizio Pompei & Andrea Ricci, 2011. "Temporary job protection and productivity growth in EU economies," Quaderni del Dipartimento di Economia, Finanza e Statistica 87/2011, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  4. Francesco Venturini, 2011. "Product variety, product quality, and evidence of Schumpeterian endogenous growth: a note," Quaderni del Dipartimento di Economia, Finanza e Statistica 93/2011, Università di Perugia, Dipartimento Economia, Finanza e Statistica.

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