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Estimating vertical spillovers from FDI: Why results vary and what the true effect is

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  • Havranek, Tomas
  • Irsova, Zuzana

Abstract

In the last decade, more than 100 researchers have examined productivity spillovers from foreign affiliates to local firms in upstream or downstream sectors. Yet results vary broadly across methods and countries. To examine these vertical spillovers in a systematic way, we collected 3626 estimates of spillovers and reviewed the literature quantitatively. Our meta-analysis indicates that model misspecifications reduce the reported estimates and journals select relatively large estimates for publication. No selection, however, was found for working papers. Taking these biases into consideration, the average spillover to suppliers is economically significant, whereas the spillover to buyers is statistically significant but small. Greater spillovers are received by countries that have underdeveloped financial systems and are open to international trade. Greater spillovers are generated by investors who come from distant countries and have only a slight technological edge over local firms.

Suggested Citation

  • Havranek, Tomas & Irsova, Zuzana, 2011. "Estimating vertical spillovers from FDI: Why results vary and what the true effect is," Journal of International Economics, Elsevier, vol. 85(2), pages 234-244.
  • Handle: RePEc:eee:inecon:v:85:y:2011:i:2:p:234-244
    DOI: 10.1016/j.jinteco.2011.07.004
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    References listed on IDEAS

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    Keywords

    Foreign direct investment; Productivity; Spillovers; Meta-analysis; Publication selection bias;

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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    1. Meta-Analysis in Economics

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