A Meta-Analysis of FDI and Productivity Spillovers in Developing Countries

Category: PhD| research

16 Sep 2014

Profile_Picture_2EDEM PhD researcher Binyam Afewerk Demena presented a paper entitled “A Meta-Analysis of FDI and Productivity Spillovers in Developing Countries” at the 8th annual MAER-Net Colloquium held in University of Athens, Greece on September 11-13 2014.  The conference is co-organized by the department of Economics, University of Athens and the Meta-Analysis of Economics Research Network (MEAT-Net). MAER-Net is an international network of scholars who specialize in Meta-analysis. The purpose of the colloquium is to share ideas and methods among meta-analysts and to encourage young scholars to use Meta-analysis.

This study reviews the intra-sectoral heterogeneity of productivity spillovers from FDI in a large sample of developing countries. I investigate publication selection bias, and estimate the true underlying empirical FDI-spillover effects. I collect 1,450 spillover estimates conducted by 93 researchers from 69 empirical studies dealing with 31 developing countries for the period of 1986 to 2013. My results suggest that FDI-spillover effects are tainted with moderate to substantial publication bias. In combination with model misspecifications of the primary studies, the bias overstates the true underlying Meta-effect by about 48 per cent of the actual magnitude of the effect size. Once the biases have been corrected, the Meta-effect in the context of developing countries is economically significant. Most importantly, I find that spillovers and their sign depend systematically on the heterogeneity of method and publication characteristics. Furthermore, empirical work disregarded the argument that spillovers requires analysis of the transmission channels through which they actually occur. It does allow to narrow the heterogeneity nature of spillover estimates. Results are robust for different methods.

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