New Directions in Theory and Policy
Edited by Phillip Arestis, Michelle Baddeley and John S.L. McCombie
Chapter 10: Foreign Direct Investment and Productivity Spillovers: A Sceptical Analysis of Some OECD Economies
10. Foreign direct investment and productivity spillovers: a sceptical analysis of some OECD economies* 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...
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