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FDI Spillovers and their Interrelationships with Trade

Author

Listed:
  • Molly Lesher

    (OECD)

  • Sébastien Miroudot

    (OECD)

Abstract

Foreign direct investment (FDI) represents an increasingly important dimension of international economic integration with global FDI flows growing faster than output over the past two decades. FDI is a particular form of investment, as it transfers knowledge as well as finance that may otherwise be unavailable in the domestic economy. This paper uses firm-level data to identify FDI spillovers across countries, sectors and time. The analysis suggests that knowledge-related spillovers from FDI vary considerably across sectors. Services industries enjoy the strongest productivity-enhancing effects of FDI, particularly through backward linkages. There is no strong evidence of horizontal productivity spillovers at the aggregate level. The results also indicate a significant and positive correlation between the degree of trade openness and output when measuring the impact of foreign presence in the domestic economy. A positive interaction is found between trade liberalisation and productivity spillovers. Thus, trade liberalisation can be seen as an important component of any reform package designed to help countries maximise the benefits of FDI.

Suggested Citation

  • Molly Lesher & Sébastien Miroudot, 2008. "FDI Spillovers and their Interrelationships with Trade," OECD Trade Policy Papers 80, OECD Publishing.
  • Handle: RePEc:oec:traaab:80-en
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    File URL: http://dx.doi.org/10.1787/235843308250
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    Citations

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    Cited by:

    1. Damijan, Jože P. & Rojec, Matija & Majcen, Boris & Knell, Mark, 2013. "Impact of firm heterogeneity on direct and spillover effects of FDI: Micro-evidence from ten transition countries," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 895-922.
    2. Tomas Havranek & Zuzana Irsova, 2011. "How to Stir Up FDI Spillovers: Evidence from a Large Meta-Analysis," William Davidson Institute Working Papers Series wp1021, William Davidson Institute at the University of Michigan.
    3. Robert Price & Andreas Wörgötter, 2011. "Estonia: Making the Most of Globalisation," OECD Economics Department Working Papers 876, OECD Publishing.
    4. Jan Hanousek & Evzen Kocenda & Pavla Vozarova, 2017. "Productivity and Trade Spillovers: Horizontal Crowding-Out Versus Vertical Synergies in Europe as a Response to Foreign Direct Investment," CERGE-EI Working Papers wp601, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    5. Marjan Petreski & Branimir Jovanovic & Igor Velickovski, 2017. "Tariff-Induced (De)industrialization: An Empirical Analysis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(3), pages 345-381, September.
    6. Juhász, Anikó & Wagner, Hartmut, 2013. "An analysis of Hungarian agri-food export competitiveness," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 0(Number 3), pages 1-7, December.
    7. Radovan Kovačević, 2009. "The Structural Characteristics Of World Trade And The Merchandise Exports Of Serbia," Economic Annals, Faculty of Economics, University of Belgrade, vol. 54(181), pages 55-92, April – J.
    8. Jean-Marc Fournier, 2015. "The negative effect of regulatory divergence on foreign direct investment," OECD Economics Department Working Papers 1268, OECD Publishing.
    9. Laura Casi & Laura Resmini, 2014. "Spatial complexity and interactions in the FDI attractiveness of regions," Papers in Regional Science, Wiley Blackwell, vol. 93, pages 51-78, November.
    10. Tomas Havranek & Zuzana Irsova, 2012. "Survey Article: Publication Bias in the Literature on Foreign Direct Investment Spillovers," Journal of Development Studies, Taylor & Francis Journals, vol. 48(10), pages 1375-1396, October.
    11. Pavla NIKOLOVOVÁ, 2013. "Sourcing Patterns of FDI Activity and Their Impact on the Domestic Economy," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(3), pages 288-302, July.

    More about this item

    Keywords

    backward linkage; FDI; forward linkage; IAS 19; investment; micro data; services; spillovers; technology; trade liberalisation; trade openness;

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