THE EFFECT OF FOREIGN DIRECT INVESTMENT ON LABOUR PRODUCTIVITY: EVIDENCE FROM ESTONIA AND SLOVENIA

Priit Vahter

No 32, University of Tartu - Faculty of Economics and Business Administration Working Paper Series from Faculty of Economics and Business Administration, University of Tartu (Estonia)

Abstract: This paper studies the effects of foreign direct investment on labour productivity in manufacturing industries of two transition countries, Estonia and Slovenia. The emphasis is on the dimension of export/local market orientation. The study is based on firm-level panel data. It is shown that in Estonia the export oriented foreign investment enterprises have on average much lower labour productivity level than the domestic market oriented foreign affiliates. In Slovenia, on the contrary, the export orientation of a foreign affiliate is not correlated with lower labour productivity. No horizontal spillovers of foreign direct investment to domestic firms are detected in Estonia. In Slovenia, however, positive spillovers to domestic firms are found but there is no indication of spillovers to other foreign affiliates. The findings show that different types of foreign direct investment can have different effects on the host country and that the existence of positive spillovers may depend on the level of economic development of the host country.

Keywords: foreign direct investment; productivity; spillovers; export oriented FDI (search for similar items in EconPapers)
JEL-codes: F10 F21 F23 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2004
New Economics Papers: this item is included in nep-ifn and nep-tra
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:mtk:febawb:32

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