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Which Foreigners are Worth Wooing? A Meta-Analysis of Vertical Spillovers from FDI

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  • Tomas Havranek
  • Zuzana Irsova

Abstract

The principal argument for subsidizing foreign investment, especially in developing and transition economies, is the assumed spillover of technology to local firms. Yet researchers report mixed results on spillovers. To examine the phenomenon in a systematic way, we collected 3,626 estimates from 57 empirical studies on between-sector spillovers and reviewed the literature quantitatively. Our results indicate that model misspecifications reduce the reported estimates, but that journals select relatively large estimates for publication. The underlying spillover to suppliers is positive and economically significant, whereas the spillover to buyers is insignificant. Greater spillovers are generated by investors that come from distant countries and that have only slight technological advantages over local firms. In addition, greater spillovers are received by countries that have underdeveloped financial systems and that are open to international trade.

Suggested Citation

  • Tomas Havranek & Zuzana Irsova, 2010. "Which Foreigners are Worth Wooing? A Meta-Analysis of Vertical Spillovers from FDI," William Davidson Institute Working Papers Series wp996, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2010-996
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    References listed on IDEAS

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    More about this item

    Keywords

    Foreign direct investment; Productivity; Spillovers; Meta-analysis; Publication selection bias;
    All these keywords.

    JEL classification:

    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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