Spill-over effects of foreign direct investment: an econometric study of Indian firms
AbstractThe channel through which the inflows of foreign direct investment (FDI) contribute to economic progress of the host economy like India can both be direct as well as indirect. Such pecuniary benefits resulting in improved productivity of local firms which cannot be fully appropriated by foreign investors are better known in the literature as spill-over effects. The paper is based on the following research question: what are the firm-level direct impact and indirect effects of FDI in India? This question is analysed with reference to a micro-level investigation which tests particularly for inter- and intra-industrial spill-overs from FDI by applying a Panel framework with Levinsohn-Petrin approach. The study envelops a rich firm-level dataset from 22 sectors of Indian Manufacturing industries and over a time period from 2006 to 2010. After controlling for firm-wise and year-wise effects, the paper finds marginal and insignificant direct impact and mixed spill-over effects of FDI inflow on the productivity of local firms.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 37759.
Date of creation: Nov 2011
Date of revision:
FDI; spill-over effects; panel data; Levinsohn-Petrin approach;
Find related papers by JEL classification:
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-04-10 (All new papers)
- NEP-CSE-2012-04-10 (Economics of Strategic Management)
- NEP-EFF-2012-04-10 (Efficiency & Productivity)
- NEP-SBM-2012-04-10 (Small Business Management)
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