Foreign Direct Investment in Services and Manufacturing Productivity Growth : Evidence for Chile
During the 1990s, foreign direct investment in producer service sectors in Latin America was massive. Such investment may increase the quality of services, reduce their cost, and offer opportunities for knowledge spillovers to downstream users of t...
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| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2008/09/9891604/foreign-direct-investment-services-manufacturing-productivity-growth-evidence-chile http://hdl.handle.net/10986/6947 |
| Summary: | During the 1990s, foreign direct
investment in producer service sectors in Latin America was
massive. Such investment may increase the quality of
services, reduce their cost, and offer opportunities for
knowledge spillovers to downstream users of the services.
This paper examines the effects of foreign direct investment
in services on manufacturing productivity growth in Chile
between 1992 and 2004. The authors estimate an extended
production function where plant output growth depends on
input growth and a weighted measure of foreign direct
investment in services. The novelty of the approach is that
the authors are able to assess the intensity of usage of
various types of services at the plant level and use that
information in the estimation of the importance of foreign
direct investment in those services. The econometric results
show a positive and significant effect of foreign direct
investment in services on productivity growth of Chilean
manufacturing plants which is robust to a multitude of
tests. The economic impact of the estimates is that forward
linkages from foreign direct investment in services account
for almost 5 percent of the observed increase in Chilean
manufacturing productivity growth during the sample period.
This evidence therefore suggests that reducing the barriers
restricting foreign direct investment in services in many
developing economies may help accelerate productivity growth
in their manufacturing sectors. |
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