Learning or leaning: persistent and transitory growth spillovers from FDI
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Washington: The World Bank, 2016. (Policy Research Working Paper; No. 7591).
Research output: Working paper › Working papers
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TY - UNPB
T1 - Learning or leaning
T2 - persistent and transitory growth spillovers from FDI
AU - Davies, Ronald B.
AU - Lamla, Michael J.
AU - Schiffbauer, Marc
PY - 2016
Y1 - 2016
N2 - Using firm-level data for Jordan, the paper estimates the extent to which growth spillovers from foreign direct investment (FDI) to local firms stem from persistent learning externalities (i.e., they endure even after foreign investment leaves as knowledge has been transferred to local firms) or from transitory effects (e.g., demand increases that evaporate following disinvestment). The paper find that spillovers have a significant transitory nature, with employment and capital growth declining when FDI falls, particularly in downstream industries supplied by locals. This suggests that if FDI-attracting policies are intended to promote sustainable growth, it may be more effective to attract and retain FDI via long-term structural policies, for instance, through low corporate tax rates rather than temporary tax holidays or through policies that strengthen the domestic absorptive capacity and linkages between foreign and local firms.
AB - Using firm-level data for Jordan, the paper estimates the extent to which growth spillovers from foreign direct investment (FDI) to local firms stem from persistent learning externalities (i.e., they endure even after foreign investment leaves as knowledge has been transferred to local firms) or from transitory effects (e.g., demand increases that evaporate following disinvestment). The paper find that spillovers have a significant transitory nature, with employment and capital growth declining when FDI falls, particularly in downstream industries supplied by locals. This suggests that if FDI-attracting policies are intended to promote sustainable growth, it may be more effective to attract and retain FDI via long-term structural policies, for instance, through low corporate tax rates rather than temporary tax holidays or through policies that strengthen the domestic absorptive capacity and linkages between foreign and local firms.
KW - Economics
KW - FDI
KW - Spillovers
M3 - Working papers
T3 - Policy Research Working Paper
BT - Learning or leaning
PB - The World Bank
CY - Washington
ER -