Working Paper: NBER ID: w8724
Authors: Jonathan E. Haskel; Sonia C. Pereira; Matthew J. Slaughter
Abstract: Are there productivity spillovers from FDI to domestic firms, and, if so, how much should host countries be willing to pay to attract FDI? To examine these questions we use a plant-level panel covering U.K. manufacturing from 1973 through 1992. Across a wide range of specifications, we estimate a significantly positive correlation between a domestic plant's TFP and the foreign-affiliate share of activity in that plant's industry. This is consistent with positive FDI spillovers. We do not generally find significant effects on plant TFP of the foreign-affiliate share of activity in that plant's region. Typical estimates suggest that a 10 percentage-point increase in foreign presence in a U.K. industry raises the TFP of that industry's domestic plants by about 0.5 percent. We also use these estimates to calculate the per-job value of these spillovers. These calculated values appear to be less than per-job incentives governments have granted in recent high-profile cases, in some cases several times less.
Keywords: No keywords provided
JEL Codes: F2; L1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| foreign direct investment (FDI) (F23) | total factor productivity (TFP) (D24) |
| foreign-affiliate share of activity (F23) | total factor productivity (TFP) (D24) |
| foreign direct investment (FDI) (F23) | productivity spillovers (O49) |
| characteristics of domestic plants (size, technology, skill intensity) (L23) | productivity spillovers (O49) |
| foreign-affiliate share of activity in the same region (F23) | total factor productivity (TFP) (D24) |