Working Paper: CEPR ID: DP3485
Authors: Holger Grg; David Greenaway
Abstract: Many governments offer significant inducements to attract inward investment, motivated by the expectation of spillover benefits. This paper begins by reviewing possible sources of spillovers. It then provides a comprehensive evaluation of the empirical evidence on productivity, wages and exports spillovers in developing, developed and transitional economies. Although theory can identify a range of possible spillover channels, robust empirical support for positive spillovers is hard to find. The reasons for this are explored and the paper concludes with a review of policy aspects.
Keywords: foreign direct investment; productivity; spillovers; technology transfer
JEL Codes: F21; F23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Foreign Direct Investment (FDI) (F21) | Productivity Spillovers (O49) |
| Multinational Enterprises (MNEs) (F23) | Domestic Firms' Productivity Gains (O49) |
| Imitation of New Technologies (O33) | Productivity Gains for Local Firms (D22) |
| Skills Acquisition Through Labor Mobility (J68) | Productivity Gains for Local Firms (D22) |
| Increased Competition (L13) | Productivity Gains for Local Firms (D22) |
| Foreign Direct Investment (FDI) (F21) | Export Spillovers (F69) |
| Access to Foreign Market Information (F10) | Export Spillovers (F69) |
| Absorptive Capacity of Domestic Firms (F23) | Realizing Spillovers (F69) |
| Competitive Pressures from Foreign Firms (F23) | Domestic Firms' Market Share (F23) |
| Competitive Pressures from Foreign Firms (F23) | Domestic Firms' Productivity (D22) |