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The Veblen-Gerschenkron Effect of FDI in Mezzogiorno and East Germany

  • Giovanni Peri

    (University of California, Davis)

  • Dieter Urban

    (LSE, CEP)

The presence of foreign multinational enterprises (MNEs) can benefit local economies. In particular, if MNEs are very productive compared to domestic firms, they may promote learning and catch-up of local firms. Such a channel of spillovers from MNEs to local firms is known as the Veblen- Geschenkron effect. Rather than the overall density of MNEs in a region or sector, it is their initial productivity advantage on the local firm to determine the positive effect on domestic productivity growth. We test this hypothesis using firm level data for German and Italian companies during the 90ies and we find evidence of a significant and robust Veblen-Gerschenkron effect.

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Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 164.

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Date of creation: 01 Nov 2002
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Handle: RePEc:csl:devewp:164
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