FDI and the Consequences: Towards more complete capture of spillover effects

We analyze productivity spillovers of FDI on domestic companies, both within and across industries. In the identification of intraindustry spillovers, we separate out labor market effects from other effects. Interindustry spillovers are identified through upstream, downstream, and supply-backward linkage effects. Dynamic input output tables are used to construct the linkages. For a panel of Romanian firms, we find evidence that labor market effects differ from other intraindustry effects. Spillovers across industries dominate those within industries. The supply-backward effect behaves as predicted by theory. Firm-specific level of technology, firm size, and ownership structure are all found to affect spillovers.http://deepblue.lib.umich.edu/bitstream/2027.42/64405/1/wp886.pd

Reform, FDI and Economic Growth: Tale of the Tortoise and the Hare

Our main interest is the impact of the choice of the speed of economic reform on economic growth. We estimate a system of 3 equations where economic growth, economic reform and FDI are jointly determined. We find that new reforms affect economic growth negatively but attract FDI, whereas the level of past reform leads to higher growth. This means that the immediate adjustment cost of new reforms is counterbalanced by an immediate increase in FDI inflows and higher growth in the future through a higher level of past reform. Reform reversals contribute to lower growth. We use the model to simulate the impact of big bang reform and gradualist reform on economic growth. This is only meaningful in the presence of reform reversals, which requires aggregate uncertainty about the appropriate reform path. Using the coefficients from the empirical model we find that even relatively small ex ante reversal probabilities suffice to tilt the balance in favour of gradualism. This could be reinforced by the shortsightedness of policymakers, but may be moderated by voter myopia.http://deepblue.lib.umich.edu/bitstream/2027.42/40116/3/wp730.pd

FDI and the Consequences: Towards more complete capture of spillover effects

We analyze productivity spillovers of FDI on domestic companies, both within and across industries. In the identification of intraindustry spillovers, we separate out labor market effects from other effects. Interindustry spillovers are identified through upstream, downstream, and supply-backward linkage effects. Dynamic input output tables are used to construct the linkages. For a panel of Romanian firms, we find evidence that labor market effects differ from other intraindustry effects. Spillovers across industries dominate those within industries. The supply-backward effect behaves as predicted by theory. Firm-specific level of technology, firm size, and ownership structure are all found to affect spillovers.FDI, spillovers, absorptive capability, firm size, ownership structure

Russia from Bust to Boom: Oil, Politics or the Ruble?

This paper develops and estimates a small macroeconomic model of the Russian economy. The model is tailored to analyze the impact of the oil price, the exchange rate, and political stability on economic performance. The model does very well in explaining Russia’s economic history in the period 1995-2002. We then use the model to simulate two sets of scenarios, one with various oil price scenarios and one with various adverse shocks. The simulations suggest that the Russian economy is still very vulnerable to oil price swings, and that these swings have asymmetric effects. Indeed the cost of a downward swing of oil prices seems to be larger than the benefit of an upward swing. We also find that the aggregate effects of an oil price collapse are comparable to these of renewed political instability. Although their propagation mechanism is quite different, both adverse shocks do have a similar effect on real GDP. A real exchange rate appreciation on the other hand has relatively mild effects on real GDP. All in all, it is suggested that Russia should reduce its vulnerability to adverse oil price shocks and maintain political stability.http://deepblue.lib.umich.edu/bitstream/2027.42/40108/3/wp722.pd

Knowledge Spillovers and the Timing of Foreign Entry

We analyze how foreign presence affects local ?firm productivity. We relax the standard implicit assumption that spillovers are immediate and permanent. We ?find that spillovers are dynamic. Foreign entry of a majority foreign owned fi?rm has a short run negative effect on the productivity of local competitors, which is more than offset by a longer run positive effect. The entry of minority foreign owned fi?rms has an immediate, though short-lived, positive effect on local suppliers. The entry of majority foreign owned fi?rms also improves the productivity of local suppliers, but the effect materializes later and lasts longer.FDI, spillovers, dynamics, timing

Russia from Bust to Boom: Oil, Politics or the Ruble?

This paper develops and estimates a small macroeconomic model of the Russian economy. The model is tailored to analyze the impact of the oil price, the exchange rate, and political stability on economic performance. The model does very well in explaining Russia’s economic history in the period 1995-2002. We then use the model to simulate two sets of scenarios, one with various oil price scenarios and one with various adverse shocks. The simulations suggest that the Russian economy is still very vulnerable to oil price swings, and that these swings have asymmetric effects. Indeed the cost of a downward swing of oil prices seems to be larger than the benefit of an upward swing. We also find that the aggregate effects of an oil price collapse are comparable to these of renewed political instability. Although their propagation mechanism is quite different, both adverse shocks do have a similar effect on real GDP. A real exchange rate appreciation on the other hand has relatively mild effects on real GDP. All in all, it is suggested that Russia should reduce its vulnerability to adverse oil price shocks and maintain political stability.Russia, Macroeconomic Modeling, Macroeconomic stabilization

The productivity and export spillovers of the internationalisation behaviour of Belgian firms

This paper analyses to what extent the decision to start exporting may be subject to spillovers of the internationalisation behaviour of other (foreign and domestic) firms. We distinguish between two possible channels: effects on productivity and effects on the perceived level of sunk costs of exporting. For both channels, we consider geographical and activity or industry-based linkages between firms. For a sample Belgian firms we find evidence of significant spillovers on productivity as well as productivity-independent spillovers on the decision to start exporting. Spillovers seem more substantial in the geographical dimension than in terms of competitor, client or supplier links, except for the impact of multinationals on the productivity of domestic firms.Export, FDI, spillovers, sunk cost, region