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Quantifying Productivity Gains from Foreign Investment

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  • Fons-Rosen, Christian
  • Kalemli-Ozcan, Sebnem
  • Sørensen, Bent E
  • Villegas-Sanchez, Carolina
  • Volosovych, Vadym

Abstract

We quantify the causal effect of foreign investment on total factor productivity (tfp) using a new global firm-level database. Our identification strategy relies on exploiting the difference in the amount of foreign investment by financial and industrial investors and simultaneously controlling for unobservable firm and country-sector-year factors. Using our well identified firm level estimates for the direct effect of foreign ownership on acquired firms and for the spillover effects on domestic firms, we calculate the aggregate impact of foreign investment on country-level productivity growth and find it to be very small.

Suggested Citation

  • Fons-Rosen, Christian & Kalemli-Ozcan, Sebnem & Sørensen, Bent E & Villegas-Sanchez, Carolina & Volosovych, Vadym, 2013. "Quantifying Productivity Gains from Foreign Investment," CEPR Discussion Papers 9434, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9434
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    More about this item

    Keywords

    FDI; Knowledge Spillovers; Multinationals; Selection;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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