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Productivity Spillovers From Multinational Corporations: Vulnerability To Deficient Estimation

Listed author(s):
  • Isabel Proenca

    (ISEG-UTL)

  • Maria Paula Fontoura

    (ISEG-UTL)

  • Nuno Crespo

    (ISEG-UTL)

Evidence on productivity spillovers from FDI to domestic firms is ambiguous. Incorrect estimation procedures may be one of the sources for the contradictory results obtained in empirical studies on this subject. We observe that inadequacy of the estimation procedures leads to a severe underestimation of the spillover effect. In discussing the appropriated econometric methodology, inconsistency due to simultaneity of FDI and other explanatory variables and endogeneity related to firm unobserved heterogeneity are specially addressed. Additionally, incorrect inference and the possible lack of precision in estimation due to the availability of few periods in the panel are also analysed.

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File URL: http://econwpa.repec.org/eps/it/papers/0508/0508004.pdf
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Paper provided by EconWPA in its series International Trade with number 0508004.

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Length: 11 pages
Date of creation: 05 Aug 2005
Handle: RePEc:wpa:wuwpit:0508004
Note: Type of Document - pdf; prepared on windows; pages: 11
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Holger Görg & David Greenaway, 2004. "Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," World Bank Research Observer, World Bank Group, vol. 19(2), pages 171-197.
  2. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
  3. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
  4. Kokko, Ari, 1994. "Technology, market characteristics, and spillovers," Journal of Development Economics, Elsevier, vol. 43(2), pages 279-293, April.
  5. K. Schoors & B. Van Der Tol, 2002. "Foreign direct investment spillovers within and between sectors: Evidence from Hungarian data," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 02/157, Ghent University, Faculty of Economics and Business Administration.
  6. Steven Globerman, 1979. "Foreign Direct Investment and `Spillover' Efficiency Benefits in Canadian Manufacturing Industries," Canadian Journal of Economics, Canadian Economics Association, vol. 12(1), pages 42-56, February.
  7. Stephen Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  8. Crespo, Nuno & Fontoura, Maria Paula, 2007. "Determinant Factors of FDI Spillovers - What Do We Really Know?," World Development, Elsevier, vol. 35(3), pages 410-425, March.
  9. Gorg, Holger & Strobl, Eric, 2001. "Multinational Companies and Productivity Spillovers: A Meta-analysis," Economic Journal, Royal Economic Society, vol. 111(475), pages 723-739, November.
  10. Flôres Junior, Renato Galvão & Fontoura, Maria Paula & Santos, Rogério Guerra, 2002. "Foreign direct investment spillovers: additional lessons from a country study," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 455, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  11. Richard Harris & Catherine Robinson, 2003. "Foreign Ownership and Productivity in the United Kingdom Estimates for U.K. Manufacturing Using the ARD," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(3), pages 207-223, May.
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