A Note on Labor Productivity and Foreign Inward Direct Investment
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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- 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.
- 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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