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Thursday, 25 March 2010

FDI and domestic spillovers, 2nd Edition

Another paper on the issue of foreign direct investment (FDI) and domestic spillovers. It examines the effects of FDI on on the performance of firms in three emerging market economies, Bulgaria, Romania and Poland :

I find evidence that foreign firms perform better than domestic ones, however, I do not find evidence for the presence of positive ‘spillovers’ of foreign investors to the domestic firms. In contrast, I find evidence which suggests no ‘spillovers’ for Bulgaria and Romania and negative ‘spillovers’ for Poland on average. I suggest that the competition effect dominates the technological spillover effect in Poland. Once contolled for the absorptive capacity of firms, I report evidence of positive spillovers of FDI for R&D intensive firms in Bulgaria and Poland. While previous studies have found positive spillovers from DFI to domestic firms, which motivated policies to attract FDI, the results in this paper suggest that policies to attract DFI might lead to perverse effects in the short run.
This is in line with the previous paper on Ghana. That post also provides thoughts on the implications for Zambian policy.

1 comment:

  1. Joseph Stiglitz highlights the problem with using GDP as a measure of economic growth after privatisation.

    He almost describes Zambia's example perfectly.

    Joseph Stiglitz - Problems with GDP as an Economic Barometer


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