A Note on Labor Productivity and Foreign Inward Direct Investment

Arbeitspapier

Foreign Direct Investment (FDI) is not only a transfer of capital, but a complex bundle of capital and firm-specific assets like production and management know-how. In particular, the transfer of production know-how improves overall productivity of FDI-receiving firms and to some extent also that of the other firms due to spillovers. From a host country's point of view this kind of productivity improvement forms an important contribution to overall growth. The present note uses a small panel of Austrian manufacturing sectors and investigates this hypothesis empirically. Using a fiexible CES-framework we indeed find significant productivity improving effects of inward FDL Furthermore, there is some evidence that FDI induces labor-augmenting productivity effects. Thus, the job creation potential of FDI highlighted in previous studies is likely to be overestimated.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WIFO Working Papers ; No. 109

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models ; Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity ; International Investment; Long-term Capital Movements ; Multinational Firms; International Business
• Subject: labor productivity ; foreign direct investment ; panel econometrics ; Auslandsinvestition ; Arbeitsproduktivität ; Theorie ; Österreich

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Egger, Peter ; Pfaffermayr, Michael
• Event: Veröffentlichung
• (who): Austrian Institute of Economic Research (WIFO)
• (where): Vienna
• (when): 1999

Further information

• Handle: http://hdl.handle.net/10419/128665
• Last update: 10.03.2025, 11:42 AM CET