Multinational companies and indigenous development: An empirical analysis

This paper presents an empirical study of the effect of foreign multinational companies on the development of indigenous firms in the host country. Our starting point is a recent paper by Markusen and Venables (European Economic Review 43 (1999) 335-356) that shows formally that multinationals, through the creation of linkages with indigenous suppliers, can exert positive effects on the development of indigenous firms. Based on the literature on entry in industrial organisation, we estimate empirically a model describing the entry of indigenous firms using data for the Irish manufacturing sector. Our results indicate that there is a positive effect of multinational companies on the entry of indigenous firms for a variety of alternative specifications.     

WHY DO RATES OF β‐CONVERGENCE DIFFER? A META‐REGRESSION ANALYSIS

The roles played by differences in study design and methodology in influencing the estimates of β‐convergence have been hinted at in narrative reviews of the empirical convergence literature. While such reviews are useful, they only provide informal evidence as to the reasons for the study‐to‐study variation in reported convergence rates. In contrast, meta‐regression analysis is a way of formally measuring the roles played by study design and methodology in influencing β‐convergence. In cross‐national studies, convergence rates are found to be higher when panel estimation methods are used, and when human capital development, investment rates and spatial factors are controlled for. The longer the time span covered by the estimation, the lower the rates. In intra‐national studies, β‐convergence is higher when the investment rate is included as a conditioning variable and when GMM estimation methods are used. Rates are found to be lower in studies of developing countries.     

Subsidizing Industry: An Empirical Analysis of Irish Manufacturing

Irish industrial policy makers have a long history of extensively using grant subsidies in order to encourage the creation of jobs in Irish manufacturing sectors. In this paper we empirically investigate the actual success of this strategy using sectoral level data on employment and grant payments over the period 1972–2000. Results from our empirical model of an employment growth equation confirm that grant provision has indeed played a significant role in creating employment.     

The impact of climatic change on agricultural production: Is it different for Africa?

This paper examines the impact of climatic change on the level of total agricultural production of Sub-Saharan Africa (SSA) and non-Sub-Sahara Africa (NSSA) developing countries. In doing so it uses a new cross-country panel climatic dataset in an agricultural production framework. The results show that climate, measured as changes in country-wide rainfall and temperature, has been a major determinant of agricultural production in SSA. In contrast, NSSA countries appear not to be affected by climate in the same manner. Simulations using the estimates suggest that the detrimental changes in climate since the 1960s can account for a substantial portion of the gap in agricultural production between SSA and the rest of the developing world.     

Spillovers from Foreign Firms through Worker Mobility: An Empirical Investigation*

While there is a large empirical literature on productivity spillovers from multinationals, this literature treats the channels through which these spillover effects work as a black box. The new approach in this paper is to investigate whether spillovers occur via worker mobility. We use data on whether or not the owner of a domestic firm has previous experience in a multinational, and relate this information to firm‐level productivity. Our results suggest that firms which are run by owners who worked for multinationals in the same industry immediately prior to opening up their own firm are more productive than other domestic firms.     

Foreign direct investment, agglomerations, and demonstration effects: An empirical investigation

Previous studies have shown that the localisation of firms can be an important factor in attracting new foreign direct investment into a host country. The authors distinguish between “efficiency agglomerations” which arise as firms increase their efficiency by locating close to each other, and “demonstration effects” whereby existing firms send signals to new investors as to the reliability and attractiveness of the host country. They try to disentangle these two effects by examining the location of US firms in Ireland. They find that both sources of agglomerations have been important determinants of US firm entry into Ireland. JEL no. F23     

Learning by Doing and Spillovers: Evidence from Firm-Level Panel Data

In this paper we extend the Bahk and Gort (1993) (Journal of Political Economy, 101, 561–583) approach of testing for the impact of learning by doing (LBD) on firm productivity using data on a panel of Spanish manufacturing firms. Specifically, we show that support for firm specific LBD and spillovers from sector-wide LBD seems to hinge crucially on the econometric methodology, and hence the underlying assumptions, employed. Once potential biases due to unobserved time invariant firm specific effects and endogeneity are taken account of, there is only support for spillovers from sector-wide LBD. Moreover, results depend on the definition of LBD employed.     

The formal sector wage premium and firm size

We show theoretically that when larger firms pay higher wages and are more likely to be caught defaulting on labor taxes, then large-high wage firms will be in the formal and small-low wage firms will be in the informal sector. The formal sector wage premium is thus just a firm size wage differential. Using data from Ecuador we illustrate that firm size is indeed the key variable determining whether a formal sector premium exists.