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A Note on Labor Productivity and Foreign Inward Direct Investment


  • Peter Egger


  • Michael Pfaffermayr


Foreign direct investment (FDI) is not only a transfer of capital, but a complex bundle of capital and firm-specific assets. In particular, the transfer of production know-how improves overall productivity of FDI-receiving firms and to some extent also that of the other firms due to spillovers. The present note uses a small panel of Austrian manufacturing sectors and investigates this hypothesis empirically. In a flexible CES-framework, general and labour-augmenting productivity improving effects of inward FDI are found. Thus, the job creation potential of FDI highlighted in previous studies is likely to be overestimated.
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  • Peter Egger & Michael Pfaffermayr, "undated". "A Note on Labor Productivity and Foreign Inward Direct Investment," WIFO Working Papers 109, WIFO.
  • Handle: RePEc:wfo:wpaper:y:1999:i:109

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    References listed on IDEAS

    1. Lichtenberg, Frank R. & Pottelsberghe de la Potterie, Bruno v., 1998. "International R&D spillovers: A comment," European Economic Review, Elsevier, vol. 42(8), pages 1483-1491, September.
    2. Djankov, Simeon & Hoekman, Bernard, 1998. "Avenues of Technology Transfer: Foreign Investment and Productivity Change in the Czech Republic," CEPR Discussion Papers 1883, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Michael Hübler & Alexander Glas, 2014. "The Energy-Bias of North–South Technology Spillovers: A Global, Bilateral, Bisectoral Trade Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 59-89, May.
    2. Raquel Díaz Vázquez, 2003. "La globalización, inversión extranjera y desigualdades regionales," Revista de Economía Crítica, Asociación de Economía Crítica, vol. 1, pages 229-256.
    3. Adugna Lemi, 2004. "Foreign Direct Investment, Host Country Productivity And Export: The Case Of U.S. And Japanese Multinational Affiliates," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 29(1), pages 163-187, June.
    4. Anagaw Derseh Mebratie & Peter A. G. van Bergeijk, 2013. "Firm heterogeneity and development: A meta-analysis of FDI productivity spillovers," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(1), pages 53-74, February.
    5. Kaitila, Ville, 2007. "Free Trade between the EU and Russia - Sectoral Effects and Impacts on Northwest Russia," Discussion Papers 1087, The Research Institute of the Finnish Economy.
    6. repec:spr:manint:v:47:y:2007:i:5:d:10.1007_s11575-007-0041-1 is not listed on IDEAS
    7. Raquel Díaz, 2004. "Foreign direct investment and regional convergence: an international approach," ERSA conference papers ersa04p374, European Regional Science Association.


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