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Productivity Spillovers From Multinational Corporations In Portugal: Vulnerability To Deficient Estimation

  • PROENÇA, Isabel
  • FONTOURA, Paula
  • CRESPO, Nuno

Evidence on productivity spillovers from FDI to domestic firms is ambiguous. Incorrect estimation procedures may be one of the sources for the contradictory results obtained in empirical studies on this subject. We observe that inadequacy of the estimation procedures leads to a severe underestimation of the spillover effect. An appropriated econometric methodology is discussed taking into consideration the possible simultaneity of FDI and other explanatory variables and endogeneity related to firm unobserved heterogeneity. Robust inference is also addressed. Our findings for the Portuguese case seem sufficient clear to warn about spillover results obtained with a non-judicious application of the classical panel data methods.

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Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 6 (2006)
Issue (Month): 1 ()

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Handle: RePEc:eaa:aeinde:v:6:y:2006:i:1_7
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  1. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
  2. Crespo, Nuno & Fontoura, Maria Paula, 2007. "Determinant Factors of FDI Spillovers - What Do We Really Know?," World Development, Elsevier, vol. 35(3), pages 410-425, March.
  3. Caves, Richard E, 1974. "Multinational Firms, Competition, and Productivity in Host-Country Markets," Economica, London School of Economics and Political Science, vol. 41(162), pages 176-93, May.
  4. Richard Harris & Catherine Robinson, 2003. "Foreign Ownership and Productivity in the United Kingdom Estimates for U.K. Manufacturing Using the ARD," Review of Industrial Organization, Springer, vol. 22(3), pages 207-223, May.
  5. Kinoshita, Yuko, 2001. "R&D and Technology Spillovers through FDI: Innovation and Absorptive Capacity," CEPR Discussion Papers 2775, C.E.P.R. Discussion Papers.
  6. Steven Globerman, 1979. "Foreign Direct Investment and `Spillover' Efficiency Benefits in Canadian Manufacturing Industries," Canadian Journal of Economics, Canadian Economics Association, vol. 12(1), pages 42-56, February.
  7. Flôres Junior, Renato Galvão & Fontoura, Maria Paula & Santos, Rogério Guerra, 2002. "Foreign Direct Investment Spillovers: Additional Lessons From a Country Study," Economics Working Papers (Ensaios Economicos da EPGE) 455, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  8. Görg, Holger & Greenaway, David, 2003. "Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," IZA Discussion Papers 944, Institute for the Study of Labor (IZA).
  9. Gorg, Holger & Strobl, Eric, 2001. "Multinational Companies and Productivity Spillovers: A Meta-analysis," Economic Journal, Royal Economic Society, vol. 111(475), pages F723-39, November.
  10. K. Schoors & B. Van Der Tol, 2002. "Foreign direct investment spillovers within and between sectors: Evidence from Hungarian data," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 02/157, Ghent University, Faculty of Economics and Business Administration.
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