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Which Foreigners Are Worth Wooing? A Meta-Analysis of Vertical Spillovers from FDI

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Abstract

The principal argument for subsidizing foreign investment is the assumed spillover of technology to local firms. Yet researchers report mixed results on spillovers. To examine the phenomenon in a systematic way, we collected 3,626 estimates from 57 empirical studies on between-sector spillovers and reviewed the literature quantitatively. Our results indicate that model misspecifications reduce the reported estimates, but that journals select rela¬tively large estimates for publication. The underlying spillover to suppliers is positive and economically significant, whereas the spillover to buyers is insignificant. Greater spillovers are generated by investors that come from distant countries and that have only slight tech¬nological advantages over local firms. In addition, greater spillovers are received by countries that have underdeveloped financial systems and that are open to international trade.

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  • Tomáš Havránek & Zuzana Iršová, 2010. "Which Foreigners Are Worth Wooing? A Meta-Analysis of Vertical Spillovers from FDI," Working Papers IES 2010/16, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Aug 2010.
    • Handle: RePEc:fau:wpaper:wp2010_16
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    More about this item

    Keywords

    Foreign direct investment; Productivity; Spillovers; Meta-analysis; Publication selection bias;
    All these keywords.

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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