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On the Estimation of Cross-Firm Productivity Spillovers with an Application to FDI

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  • Malikov, Emir
  • Zhao, Shunan

Abstract

We develop a novel methodology for the proxy variable identification of firm productivity in the presence of productivity-modifying learning and spillovers which facilitates a unified "internally consistent" analysis of the spillover effects between firms. Contrary to the popular two-step empirical approach, ours does not postulate contradictory assumptions about firm productivity across the estimation steps. Instead, we explicitly accommodate crosssectional dependence in productivity induced by spillovers which facilitates identification of both the productivity and spillover effects therein simultaneously. We apply our model to study cross-firmspillovers in China’s electric machinery manufacturing, with a particular focus on productivity effects of inbound FDI.

Suggested Citation

  • Malikov, Emir & Zhao, Shunan, 2022. "On the Estimation of Cross-Firm Productivity Spillovers with an Application to FDI," 2022 Allied Social Sciences Association (ASSA) Annual Meeting (Virtual), January 7-9, 2022 316529, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:assa22:316529
    DOI: 10.22004/ag.econ.316529
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    Keywords

    Production Economics; Productivity Analysis;

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