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FDI and Export Upgrading

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  • Torfinn Harding
  • Beata Javorcik

Abstract

The debate on trade and growth increasingly focuses on the composition of exports. Exports of more "sophisticated" products appear to be positively correlated with growth, and upgrading the quality of exports is high on the policy agenda of many countries. This study presents evidence suggesting that attracting inflows of FDI offers potential for raising the quality of exports in developing countries. Our empirical analysis relates unit values of exports measured at the 4-digit SITC level to data on sectors treated by investment promotion agencies as priority in their efforts to attract FDI. The sample covers 105 countries over the period 1984-2000. The findings are consistent with a positive effect of FDI on unit values of exports in developing countries. The evidence for high income economies is ambiguous. When we examine the link between FDI and the overlap between the export structure of developing and high income economies ("export sophistication"), we find no evidence of FDI increasing the similarity of export structure between the two groups.

Suggested Citation

  • Torfinn Harding & Beata Javorcik, 2011. "FDI and Export Upgrading," Economics Series Working Papers 526, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:526
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    File URL: http://www.economics.ox.ac.uk/materials/papers/4836/paper526.pdf
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    References listed on IDEAS

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    1. Aitken, Brian & Hanson, Gordon H. & Harrison, Ann E., 1997. "Spillovers, foreign investment, and export behavior," Journal of International Economics, Elsevier, vol. 43(1-2), pages 103-132, August.
    2. Deborah L. Swenson, 2008. "Multinationals and the creation of Chinese trade linkages," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 596-618, May.
    3. Amit Khandelwal, 2010. "The Long and Short (of) Quality Ladders," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1450-1476.
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    Citations

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    Cited by:

    1. Rahul Anand & Kalpana Kochhar & Saurabh Mishra, 2015. "Make in India; Which Exports Can Drive the Next Wave of Growth?," IMF Working Papers 15/119, International Monetary Fund.
    2. Poncet, Sandra & Starosta de Waldemar, Felipe, 2013. "Export Upgrading and Growth: The Prerequisite of Domestic Embeddedness," World Development, Elsevier, vol. 51(C), pages 104-118.
    3. Amighini, Alessia & Sanfilippo, Marco, 2014. "Impact of South–South FDI and Trade on the Export Upgrading of African Economies," World Development, Elsevier, vol. 64(C), pages 1-17.
    4. Zhu, Shujin & Fu, Xiaolan, 2013. "Drivers of Export Upgrading," World Development, Elsevier, vol. 51(C), pages 221-233.
    5. Florian Mayneris & Sandra Poncet, 2015. "Chinese Firms' Entry to Export Markets: The Role of Foreign Export Spillovers," World Bank Economic Review, World Bank Group, vol. 29(1), pages 150-179.
    6. Sanchez-Martin, Miguel Eduardo & de Pinies, Jaime & Antoine, Kassia, 2015. "Measuring the determinants of backward linkages from FDI in developing economies : is it a matter of size ?," Policy Research Working Paper Series 7185, The World Bank.
    7. Sandra Poncet & Felipe Starosta, 2013. "Export upgrading and growth in China: the prerequisite of domestic embeddedness," PSE - G-MOND WORKING PAPERS halshs-00960684, HAL.
    8. Katharina Eck & Stephan Huber, 2016. "Product sophistication and spillovers from foreign direct investment," Canadian Journal of Economics, Canadian Economics Association, vol. 49(4), pages 1658-1684, November.
    9. Florian Mayneris & Sandra Poncet, 2010. "Export Performance of China's Domestic Firms: the Role of Foreign Export Spillovers," Working Papers 2010-32, CEPII research center.
    10. Tomasz Serwach, 2012. "Why Learning by Exporting May Not Be As Common As You Think and What It Means for Policy," International Journal of Management, Knowledge and Learning, International School for Social and Business Studies, Celje, Slovenia, vol. 1(2), pages 157-172.

    More about this item

    Keywords

    Export quality; unit values; FDI; investment promotion; industrial policy;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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