Economic Growth

Economic Growth

New Directions in Theory and Policy

Edited by Phillip Arestis, Michelle Baddeley and John S.L. McCombie

This enlightening and significant volume focuses on the nature, causes and features of economic growth across a wide range of countries and regions. Covering a variety of growth related topics – from theoretical analyses of economic growth in general to empirical analyses of growth in the OECD, transition economies and developing economies – the distinguished cast of contributors addresses some of the most important contemporary issues and developments in the field.

Chapter 10: Foreign Direct Investment and Productivity Spillovers: A Sceptical Analysis of Some OECD Economies

Carlos Rodríguez, Carmen Gomez and Jesus Ferreiro

Subjects: economics and finance, post-keynesian economics


* Carlos Rodríguez, Carmen Gomez and Jesus Ferreiro 1. INTRODUCTION One of the main features of the current process of globalisation is the liberalization of foreign direct investement (FDI) flows. Many countries, mainly developing and transition economies, but also developed countries, have implemented active policies to attract as many FDI inflows as possible, for instance, by privatising previously state-owned firms. Closely related to an export-led growth strategy, FDI flows, that is, the presence in the local economy of subsidiaries of multinational enterprises (MNEs), have been considered as a key tool to accelerate economic growth. One of the channels through which inward FDI can promote the economic growth in host economies is the existence and absorption of productivity spillovers. Our paper is an attempt to evaluate the existence of the size and direction of these externalities – a question, as we will see later, subject to a deep controversy. Although there exists in the literature a high number of papers related to this issue, the novelty of this paper is that we use a database not used in previous papers: the OECD database ‘Measuring Globalisation: the Role of Multinationals in OECD Economies’. This database gives data about employment and value added for 21 OECD economies and, what is more relevant for our paper, data about the share of foreign firms in those variables. These data are available for the whole economy and also for some industries. We have used these data to calculate the productivity of foreign and local firms in...

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