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    inward foreign direct investment

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    Read the attached journal article:

    Haskel, J.E., Pereira, S.C. & Slaughter, M.J. (2007) 'Does inward foreign direct investment boost the productivity of domestic firms?'

    Analyse and evaluate the argument presented in the article and the methodology used by the authors to examine the effects of inward FDI on local productivity. How far do their conclusions confirm or change any prior views you might have had based on your own experience or knowledge? Give full reasons for your answer.

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    Solution Preview

    Step 1
    The argument presented in the article is that there are productivity spillovers from FDI to local firms. The authors have carried out a panel study and have concluded that if there is a 10% increase in foreign-affiliate share of activity in a plant's industry, the total factor productivity in the industry's domestic plants goes up by 0.5%. However, the study holds that per-job value of spillovers is less than per-job incentives governments give in high profile cases. The study promises that in future it will carry out studies to evaluate the causes of spillovers.

    Step 2
    The methodology used by the study is the plant level panel which has reported improvement in productivity. Further, it has used plant level data to assess improvements in productivity. The study has been carried out in the United Kingdom. The ...

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