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The Effect of Foreign Direct Investment on Labour Productivity: An Overview of an Empirical Study of Estonia and Slovenia

Author

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  • Priit Vahter

    (Eesti Pank (Bank of Estonia) Research Department, University of Tartu)

Abstract

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 than the domestic market oriented foreign affiliates. In Slovenia, on the contrary, the export orientation of foreign affiliates is not correlated with lower labour productivity. No horizontal spillover of foreign direct investment to domestic firms is detected in Estonia. In Slovenia, however, positive spillovers to domestic firms are found. The findings show also that different types of foreign direct investment can have different effects on the host country and that the existence of positive spillover may depend on the level of economic development of the host country.

Suggested Citation

  • Priit Vahter, 2005. "The Effect of Foreign Direct Investment on Labour Productivity: An Overview of an Empirical Study of Estonia and Slovenia," Working Papers 123, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
    • Handle: RePEc:ttu:wpaper:123
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    References listed on IDEAS

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    1. Priit Vahter, 2004. "The Effect Of Foreign Direct Investment On Labour Productivity: Evidence From Estonia And Slovenia," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 32, Faculty of Economics and Business Administration, University of Tartu (Estonia).
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    Cited by:

    1. Jaan Masso & Kerly Krillo, 2010. "Estonia, Latvia and Lithuania: Minimum Wages in a Context of Migration and Labour Shortages," Chapters, in: Daniel Vaughan-Whitehead (ed.), The Minimum Wage Revisited in the Enlarged EU, chapter 4, Edward Elgar Publishing.

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    More about this item

    Keywords

    foreign direct investment; productivity; spillovers; export oriented foreign direct investments;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • 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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