The impact of FDI on the host economy

0383150 - NHU-C 2013 RIV CZ eng V - Research Report
Nikolovová, Pavla
The impact of FDI on the host economy.
Prague: CERGE-EI, 2012. 45 s. CERGE-EI Working Paper Series, 471. ISSN 1211-3298
R&D Projects: GA ČR(CZ) GAP403/12/0080; GA MŠMT(CZ) SVV 265801/2012
Grant - others:UK(CZ) GAUK 43010
Institutional support: PRVOUK-P23
Keywords : foreign direct investment * horizontal spillovers * international trade
Subject RIV: AH - Economics
http://www.cerge-ei.cz/pdf/wp/Wp471.pdf

The foreign direct investment (FDI) and its impact on performance of domestic firms has been studied in many empirical papers, which, however, present rather ambiguous results. I argue that this is due to some limitations of prevalently used methodology, which does not separate the FDI spillover effects from the changes in competitive environment faced by domestic firms. I propose a novel estimation strategy that allows me to disentangle FDI spillovers from the effects of competition changing in response to the entry of a foreign firm. I consider this issue on the industry level and I compare the effects of FDI to the impact of international trade on the domestic economy. My analysis covers the time period 2001 - 2007 and concerns both Western and Eastern European countries. My identification strategy leads me to confirm the presence of positive spillovers stemming from FDI.
Permanent Link: http://hdl.handle.net/11104/0213184