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Does distance matter in spillover?1

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  • László Halpern
  • Balázs Muraközy

Abstract

Our aim in this paper is twofold: to find whether FDI causes horizontal or vertical productivity spillovers to domestically‐owned Hungarian manufacturing firms, and to see if distance matters in spillovers. For this exercise we use a large panel of Hungarian firms and different panel models. Consistently with previous research, at the country level, we find positive vertical spillovers but no evidence of positive horizontal spillovers. By taking distance into consideration, however, we find positive horizontal spillovers for domestic firms close to foreign‐owned firms. By constructing spillover measures weighted by distance, we find similar patterns. Our results underline the importance of labour market rigidity and the local nature of knowledge in the case of horizontal spillovers.

Suggested Citation

  • László Halpern & Balázs Muraközy, 2007. "Does distance matter in spillover?1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15(4), pages 781-805, October.
    • Handle: RePEc:bla:etrans:v:15:y:2007:i:4:p:781-805
    DOI: 10.1111/j.1468-0351.2007.00308.x
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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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