Productivity Spillovers Research Articles

Empirical Assessment of Trade Engagements: Africa, China and the Maritime Belt and Road Initiative

Recent development economic literatures theorize that South-South trade and foreign investment may have a larger impact on economic growth in developing economies than North-South trade and investment, since investors from the South are more familiar with local developing markets and business practices, which increases their productivity spillovers (Aykut and Goldstein 2007). Amighini and Sanfilippo (2014) provided evidence that South-South trade and investments stimulate product diversification in light manufacturing industries such as agro processing, plastic, textile and leather production. The Belt and Road Initiative (BRI) launched in 2013, aims to create economic opportunities as well as improve and establish new trading routes between China and connected regions. This paper attempts to evaluate the degree of trade relations between China and selected African countries along the Maritime Silk Route (MSR) and further appraise the trade potentials and gains inherent for African economies through the initiative. To achieve our objective, we apply quantitative techniques in trade evaluation to enable us explore and estimate the degree and intensity of trade engagements amongst selected Sino-African silk route countries, identify the trade opportunities and potentials, which are critical for increased trade engagements between both parties along the route and to explore some of the channels through which the maritime route can impact on investment, trade and economic growth in Africa. Findings from the analysis indicate that while the degree of trade integration is unbalanced and favourable to China relative to Africa, the trade pattern and structure are observed to be more complementary than competitive, and this provides Africa with ample opportunity to engage in product upgrading and diversification, critical for structural transformation.

State-Owned Enterprises in Emerging Europe: The Good, the Bad, and the Ugly

State-owned enterprises (SOEs) play an important role in Emerging Europe’s economies, notably in the energy and transport sectors. Based on a new firm-level dataset, this paper reviews the SOE landscape, assesses SOE performance across countries and vis-a-vis private firms, and evaluates recent SOE governance reform experience in 11 Emerging European countries, as well as Sweden as a benchmark. Profitability and efficiency of resource allocation of SOEs lag those of private firms in most sectors, with substantial cross-country variation. Poor SOE performance raises three main risks: large and risky contingent liabilities could stretch public finances; sizeable state ownership of banks coupled with poor governance could threaten financial stability; and negative productivity spillovers could affect the economy at large. SOE governance frameworks are partly weak and should be strengthened along three lines: fleshing out a consistent ownership policy; giving teeth to financial oversight; and making SOE boards more professional.

State-Owned Enterprises in Emerging Europe: The Good, the Bad, and the Ugly

State-owned enterprises (SOEs) play an important role in Emerging Europe's economies, notably in the energy and transport sectors. Based on a new firm-level dataset, this paper reviews the SOE landscape, assesses SOE performance across countries and vis-a-vis private firms, and evaluates recent SOE governance reform experience in 11 Emerging European countries, as well as Sweden as a benchmark. Profitability and efficiency of resource allocation of SOEs lag those of private firms in most sectors, with substantial cross-country variation. Poor SOE performance raises three main risks: large and risky contingent liabilities could stretch public finances; sizeable state ownership of banks coupled with poor governance could threaten financial stability; and negative productivity spillovers could affect the economy at large. SOE governance frameworks are partly weak and should be strengthened along three lines: fleshing out a consistent ownership policy; giving teeth to financial oversight; and making SOE boards more professional.

Spatial spillovers in Mexico's labour productivity

Cet article étudie les déterminants de l'amélioration de la productivité du travail manufacturier dans les régions du Mexique. Nous adaptons les modèles de Ciccone et Hall (1996) et Ciccone (2002) pour tenir compte des débordements spatiaux. Le modèle suggère une complémentarité entre les régions grâce aux retombées technologiques, mais aussi une concurrence entre elles pour attirer les facteurs de production. Pour estimer le modèle, nous utilisons des données à un niveau micro-régional pour la période 1988–2008. Les résultats indiquent que les débordements spatiaux augmentent la productivité du travail. Les résultats suggèrent également que les dynamiques spatiales conduisent à la formation de clusters de régions très productives, mais aussi à une création de clusters de régions peu productives. Ceci contribue à la polarisation du Mexique.

Imports and Productivity: The Impact of Geography and Factor Intensity

Using micro-data for Dutch firms, we argue that the productivity spillovers from importing technology intensive products from Taiwan differ from importing unskilled-labor intensive products from Switzerland. We show that both the geographic component (what country is the import from) and the intensity component (what type of good is imported) is crucial for measuring and understanding these spillovers. We show that increasing distance and decreasing levels of development of the origin economy negatively affect the diffusion of efficiency gains embodied in imported goods. Similarly, these gains are larger for technology intensive goods and smaller for unskilled-labor intensive goods. This implies that the geographic-intensity markets are unique and cannot be lumped together. In addition, a diversified import portfolio (the extensive dimension) is always positively associated with firm-level productivity.

Regional foreign direct investment and technology spillover: evidence across different clusters in India

ABSTRACTThis paper examines whether there exist productivity spillovers from foreign direct investment (FDI) to domestic firms at the regional level, using firm-level panel dataset covering 22 manufacturing industries in India from 2000 to 2012. In order to estimate the productivity spillovers from FDI at the regional level, we select 10 industrial clusters across 4 regions in India. In estimating productivity, we control for a possible simultaneity bias by using semi-parametric estimation techniques. We find that local firms benefit from horizontal and vertical FDI, but the benefits from the latter are found to be substantially stronger. The absorptive capacity of domestic firms is highly relevant to harvest the spilled technology from foreign-owned firms. Furthermore, we find that domestic firms belonging to high-technology industries benefit more from FDI at the regional level. We also find that market concentration is a crucial conduit for firm innovation, technological upgradation, and having a direct effect on local firm total factor productivity.

The Characteristics of Domestic Firms: Materializing Productivity Spillovers from FDI

ABSTRACTUsing detailed firm-level data from Turkey, for 1991–2001, we analyze the importance of domestic firm capabilities in allowing for productivity spillovers from foreign direct investment. The absorptive capacities we investigate are technology gap, export status, and human capital of domestic firms. The study contributes to the literature by offering an alternative measure of human capital that would be more relevant in a country where there are labor market imperfections. The results provide supporting evidence for the role played by the human capital of domestic firms, i.e., the ratio of skilled, in realizing mainly horizontal spillovers.

Did FDI Really Cause Chinese Economic Growth? A Meta-Analysis

Summary Foreign direct investment (FDI) has been linked to economic growth in a number of countries. Productivity spillovers at the firm level have been identified as a key element in the process by which FDI stimulates economic growth. Moreover, there is evidence of FDI-related productivity spillovers in China. Whether these spillovers have been of sufficient size to affect growth at the aggregate level, however, is an empirical question. We apply meta-analysis to the corresponding empirical literature to find an answer. Our main finding is that the effect of FDI on Chinese economic growth is much smaller than one would expect from a naive aggregation of existing estimates. Publication bias and a profusion of estimates based on less preferred study and sample characteristics have served to inflate observed estimates. Once these effects are accounted for, the estimated effect of FDI on Chinese economic growth is reduced to statistical insignificance. This suggests that the cause(s) of the Chinese “economic miracle” likely lie elsewhere.

Technology transfer and spillovers from FDI in transition economies: A meta-analysis

In this paper, we conduct a meta-analysis of the literature that empirically examines the microeconomic impacts of foreign direct investment (FDI) in Central and Eastern Europe and the former Soviet Union. The meta-synthesis of estimates collected from relevant studies shows that both the effect size and the statistical significance of the indirect effect of FDI, namely the productivity spillover effect, are obviously lower than those of the direct effect caused by foreign participation in company management through ownership. Moreover, the meta-regression analysis reveals that, probably due to the presence of publication selection bias, previous studies have not yet provided empirical evidence of a non-zero productivity spillover effect in the region. Further research efforts are required to capture the true effect.

International, intersectoral, or unobservable? Measuring R&D spillovers under weak and strong cross-sectional dependence

In the theoretical and empirical growth literature, private and social returns to R&D have been identified as the key drivers of productivity gains and economic development. However, recently the debate on the relative importance of private vis-à-vis social returns has been reinforced by contributions in two emerging fields of the applied econometric literature, namely spatial panel modeling and the common factor approach, which stress the role of cross-sectional dependence as a source for a potential estimation bias linked to the measurement of returns to R&D. In this paper, we account for these methodical advances when estimating sectoral knowledge production functions for OECD countries under weak and strong cross-sectional dependence. By doing so, we are able to uncover technology- and trade-related R&D spillover channels associated with social returns to R&D, while effectively controlling for other types of productivity spillovers and latent macroeconomic shocks. Our results highlight the role played by international-intersectoral R&D spillovers for the social rate of return to R&D, while we get limited evidence for private returns to R&D once cross-sectional dependence is properly accounted for.

Does foreign direct investment improve the productivity of domestic firms? Technology spillovers, industry linkages, and firm capabilities

This paper explores how industrial linkages, firm capabilities, and the geographic location of domestic firms affect the diffusion of technology brought by foreign direct investment. I hypothesize that local firms are more likely to improve efficiency when they receive better product inputs from foreign suppliers and technology support by foreign customers, and such transfer of knowledge is more effective when the recipient has high absorptive capacity and is located near the source of knowledge. Empirical test using China’s manufacturing firms finds positive productivity spillovers between foreign suppliers and their domestic customers. However, there is no positive spillovers from foreign-owned customers or competitors. Domestic firms’ in-house R&D capital facilitates learning from foreign firms. Local firms learn from both joint ventures and wholly-owned foreign subsidiaries and the effects are larger from wholly-owned subsidiaries.

Wage, foreign-owned firms, and productivity spillovers via labour turnover: a non-linear analysis based on Chinese firm-level data

ABSTRACTUsing firm-level panel data from Chinese manufacturing firms over the period 2004–2007, this article investigates the impact of the wage gap between local and foreign-owned firms on foreign direct investment (FDI) spillovers in terms of total factor productivity (TFP). We find a non-linear threshold effect that: a low-level wage gap threshold exists, below which FDI spillovers are significantly negative. This is because FDI spillovers via labour turnover are blocked due to the low wages of local firms, which jeopardizes the flow of skilled workers from foreign firms to local firms. In contrast, when the wage gap reaches a high-level threshold, local firms can get benefits from FDI spillovers. The reason is that high wages of local firms attract skilled employees to leave foreign firms, which yields a large magnitude of worker mobility from foreign firms to local firms. Our article provides evidence that labour turnover as the channel of FDI spillovers only works when the wage gap is beyond some threshold. Also, these thresholds vary across regions and firm ownerships.

FDI effects on the labor market of host countries

This paper surveys literature on impact of foreign direct investments (FDI) on host country?s labor market, including employment, wages, labor productivity, skill premium, and inequality. Meta-analysis of empirical findings suggests that there is solid consensus with respect to wages: in both developing and developed countries FDI leads to higher wages in target firms and industries. Majority of the papers also find positive productivity spillovers as well as increase in skill premium as a result of FDI, especially in developing economies. We analyze all the findings together to address possible mechanisms of FDI effects on labor in target firms, in competing firms, and in vertically related firms. We present a stylized model that is consistent with many empirical regularities found in meta-analysis of empirical literature.

Direct and indirect knowledge spillovers and industrial productivity

This paper analyses the importance of externalities related to the spread of innovation across sectors. Such spillover effects arise from R&D activities and input–output (IO) linkages among sectors in the country. We borrow Spatial Econometrics techniques to make consistent estimates of the impact of these systematic direct and indirect spillovers on sector’s productivity and the possibility of other types of productivity spillovers in the error term. We find that direct spillovers emanating from IO horizontal linkages determine sector’s productivity, while the indirect effects prove to be negligible. Furthermore, the technological intensity of IO linkages and the productive structure of the underlying economy are key factors determining the effectiveness of economic policies focused on increasing total industrial productivity.

A Spatial Analysis of the R&D-Productivity Nexus at Firm Level

The aim of this paper is to evaluate the effect of research and development (R&D) on productivity by taking into account productivity spillovers. To this end, by using a sample of Italian manufacturing firms over the period 2004–2006 provided by the Xth UniCredit-Capitalia survey (2008), we have analyzed the role of R&D in firm productivity by using a spatial autoregressive model. In so doing, we have allowed the productivity of each firm to be affected by the productivity of nearby firms. Results show that R&D significantly affects Italian firm productivity and that productivity spillovers across firms matter. Moreover, productivity is found to be positively affected by intrasectoral R&D spillovers, while intersectoral R&D spillovers do not have a significant effect.

The Evolution of Physician Practice Styles: Evidence from Cardiologist Migration.

Physician treatment choices for observably similar patients vary dramatically across regions. This paper exploits cardiologist migration to disentangle the role of physician-specific factors such as preferences and learned behavior versus environment-level factors such as hospital capacity and productivity spillovers on physician behavior. Physicians starting in the same region and subsequently moving to dissimilar regions practice similarly before the move. After the move, physician behavior in the first year changes by 0.6-0.8 percentage points for each percentage point change in practice environment, with no further changes over time. This suggests environment factors explain between 60-80 percent of regional disparities in physician behavior.

An Analysis of Productivity Spillovers from Foreign Direct Investment in India’s Services Sector

The paper tries to study productivity spillovers from foreign direct investment in the services sector of India. Using firm-level data for the period 2000–2010, horizontal and vertical spillovers are tested with the help of panel data fixed effects ‘within’ model. Spillovers across different industries of the services sector are also examined. It is inferred that horizontal spillovers positively affect total factor productivity of domestic firms in the services sector. Spillovers through backward vertical channels and forward vertical channels are, however, encountered to be negative. At an industry level, it is deduced that productivity spillovers vary across different industries with horizontal spillovers being more dominant than vertical spillovers.

The external benefits of higher education

ABSTRACTThe external benefits of higher education. Regional Studies. The private-market benefits of education are widely studied at the micro-level, although the magnitude of their macroeconomic impact is disputed. However, there are additional benefits of education that are less well understood. In this paper the macroeconomic effects of external benefits of higher education are estimated using the ‘micro-to-macro’ simulation approach. Two types of externalities are explored: technology spillovers and productivity spillovers in the labour market. These links are illustrated and the results suggest they could be very large. However, this is qualified by the dearth of microeconomic evidence, for which the authors hope to encourage further work.

The Implications of India's Special Characteristics for FDI Spillovers

A number of recent studies examine technology transfer from foreign direct investment (FDI) to India's domestic industrial enterprises. This study goes further by investigating the implications of institutions for the nature of technology spillovers during 2004 - 2013. The author examines three institutional features that comprise aspects of India's “special characteristics”: (1) the different sources of FDI, where FDI is nearly evenly divided between mostly Organization for Economic Co-operation and Development (OECD) countries and Mauritius; (2) India's heterogeneous ownership structure, involving state- (SOEs) and non-state owned (non-SOEs) enterprises; and (3) industrial promotion via tariffs or through tax holidays to foreign direct investment. The author found robust positive and significant spillovers (as measured by total factor productivity) to domestic firms via backward linkages (the contacts between foreign buyers and local suppliers). The results suggest varied success with industrial promotion policies. Final goods tariffs as well as input tariffs are negatively associated with firm-level productivity. However, the author found statistically significant evidence of stronger productivity spillovers associated with firms that received tax breaks, suggesting that tax holidays were more successful than tariffs as an instrument to promote productivity growth in India.

Productivity Spillovers from FDI, Absorptive Capacity and Self-innovation Capabilities of Resource Area: Evidence from 1992–2013 in Shanxi, China

The resource areas development is facing increasingly serious challenge in post-crisis era; it is essential to propose a reasonable approach for improving the self-innovation capability of resource area by using technology spillover of foreign direct investment (FDI) and applying absorptive capacity as the conduction medium. Based on the development characteristics of resource areas, the ‘micro-meso-macro’ view three-dimensional conceptual framework of FDI spillover, absorptive capacity and self-innovation capability was constructed. Then, the empirical analysis was conducted in three steps: first, the FDI technology spillover effects between Shanxi and three eastern provinces (Jiangsu, Liaoning and Hebei) were compared; second, the absorptive capacity and the relative factors were compared; third, by taking Shanxi province as an example, the relationship between FDI technology spillover and the self-innovation capacity was verified and the conduction medium role of absorptive capacity was investigated. Finally, by combining the theoretical and empirical analysis, three suggestions were put forward for reference.