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Working Paper

Learning or Leaning : Persistent and Transitory Growth Spillovers from FDI

TAX INCENTIVES GROWTH RATES EMPLOYMENT CREDIT MARKETS EXTERNAL MNES EXPORT MARKETS ECONOMIC GROWTH ACCOUNTING PRODUCTION LAGS MULTINATIONAL CORPORATIONS FOREIGN INVESTORS INCOME FOREIGN OWNERSHIP EQUILIBRIUM PRICE MARGINAL COST EMERGING ECONOMIES REGULATORY ENVIRONMENTS EXCHANGE INFORMATION LABOR FORCE DEVELOPING COUNTRIES ELASTICITY DEVELOPING ECONOMIES INVESTMENT GROWTH EFFECTS INCENTIVES ECONOMIC POLICY VARIABLES CAPITAL STOCK PRICE TAX INPUTS JOINT VENTURES OWNERSHIP INVESTMENT BY SECTOR FOREIGN INVESTMENTS DEVELOPING COUNTRY TRENDS COMMUNICATIONS ADVANCED COUNTRIES MULTINATIONAL ENTERPRISES GLOBAL ECONOMY TRAINING DEVELOPMENT ECONOMICS PORTFOLIOS PRODUCTIVITY EXTERNALITIES TRANSFERS MARKETS ORGANIZATIONS PUBLIC FINANCE INTERNATIONAL ECONOMICS TECHNOLOGY TRANSFERS DIRECT INVESTMENT LABOR ELASTICITY OF SUBSTITUTION DISINVESTMENT UTILITY REAL ESTATE FINANCE CORPORATE TAX MARKET ECONOMIES INVESTMENT DECISIONS TECHNOLOGY EQUITY INVESTORS PRODUCTIVITY GROWTH ECONOMIC SURVEYS CAPITAL POLICIES CAPITAL VARIABLE VALUE FOREIGN DIRECT INVESTMENT CREDIT FOREIGN TECHNOLOGY MACROECONOMICS FOREIGN INVESTMENT DEMAND TRANSITION COUNTRIES TAX RATES EMPLOYMENT GROWTH FOREIGN TECHNOLOGIES JOB CREATION SHARES AFFILIATED ORGANIZATIONS BENCHMARK EMERGING PRODUCTION FUNCTION ECONOMICS OUTPUT MANAGEMENT REGRESSION ANALYSIS COMPARATIVE ECONOMICS EXPOSURE ECONOMIC DEVELOPMENT TRADE GDP GOODS THEORY SECURITY ECONOMIES OF SCALE DOMESTIC ECONOMY TECHNOLOGY TRANSFER GROWTH RATE INVESTMENT RISK HOST COUNTRY SHARE FDI INTERNATIONAL STANDARD SUPPLY BANKING AFFILIATED FOREIGN WORKERS MNE INVESTMENTS SUPPLIERS LABOUR CAPITAL INVESTMENT TECHNOLOGIES PRICES DEVELOPMENT POLICY COMPETITION INVESTMENT DECISION
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World Bank, Washington, DC
Middle East and North Africa | Jordan
2016-03-10T16:45:52Z | 2016-03-10T16:45:52Z | 2016-03

Using firm-level data for Jordan, the paper estimates the extent to which growth spillovers from foreign direct investment (FDI) to local firms stem from persistent learning externalities (i.e., they endure even after foreign investment leaves as knowledge has been transferred to local firms) or from transitory effects (e.g., demand increases that evaporate following disinvestment). The paper find that spillovers have a significant transitory nature, with employment and capital growth declining when FDI falls, particularly in downstream industries supplied by locals. This suggests that if FDI-attracting policies are intended to promote sustainable growth, it may be more effective to attract and retain FDI via long-term structural policies, for instance, through low corporate tax rates rather than temporary tax holidays or through policies that strengthen the domestic absorptive capacity and linkages between foreign and local firms.

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