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The Effect Of Foreign Direct Investment On Labour Productivity: Evidence From Estonia And Slovenia

  • Priit Vahter

This paper studies the effects of foreign direct investment on labour productivity in manufacturing industries of two transition countries, Estonia and Slovenia. The emphasis is on the dimension of export/local market orientation. The study is based on firm-level panel data. It is shown that in Estonia the export oriented foreign investment enterprises have on average much lower labour productivity level than the domestic market oriented foreign affiliates. In Slovenia, on the contrary, the export orientation of a foreign affiliate is not correlated with lower labour productivity. No horizontal spillovers of foreign direct investment to domestic firms are detected in Estonia. In Slovenia, however, positive spillovers to domestic firms are found but there is no indication of spillovers to other foreign affiliates. The findings show that different types of foreign direct investment can have different effects on the host country and that the existence of positive spillovers may depend on the level of economic development of the host country.

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File URL: http://www.mtk.ut.ee/sites/default/files/mtk/RePEc/mtk/febpdf/febawb32.pdf
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Paper provided by Faculty of Economics and Business Administration, University of Tartu (Estonia) in its series University of Tartu - Faculty of Economics and Business Administration Working Paper Series with number 32.

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Length: 50 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:mtk:febawb:32
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  1. 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.
  2. John H Dunning, 1988. "The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions," Journal of International Business Studies, Palgrave Macmillan, vol. 19(1), pages 1-31, March.
  3. Blomström, Magnus & Kokko, Ari, 2003. "Human Capital and Inward FDI," EIJS Working Paper Series 167, The European Institute of Japanese Studies.
  4. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
  5. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  6. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
  7. Djankov, Simeon & Hoekman, Bernard, 1999. "Foreign investment and productivity growth in Czech enterprises," Policy Research Working Paper Series 2115, The World Bank.
  8. 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.
  9. Greenaway, David & Sousa, Nuno & Wakelin, Katharine, 2004. "Do domestic firms learn to export from multinationals?," European Journal of Political Economy, Elsevier, vol. 20(4), pages 1027-1043, November.
  10. Delgado, Miguel A. & Farinas, Jose C. & Ruano, Sonia, 2002. "Firm productivity and export markets: a non-parametric approach," Journal of International Economics, Elsevier, vol. 57(2), pages 397-422, August.
  11. repec:wdi:papers:2003-549 is not listed on IDEAS
  12. 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.
  13. Simeon Djankov & Peter Murrell, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 739-792, September.
  14. Nigel Driffield & James H. Love, 2003. "Foreign Direct Investment, Technology Sourcing and Reverse Spillovers," Manchester School, University of Manchester, vol. 71(6), pages 659-672, December.
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