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The Impact on Domestic Productivity of Inward Investment in the UK
Author(s) -
Driffield Nigel
Publication year - 2001
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00237
Subject(s) - productivity , inward investment , economics , investment (military) , foreign direct investment , indigenous , international economics , monetary economics , labour economics , macroeconomics , politics , political science , law , ecology , biology
One of the basic tenets of UK industrial policy, that attracting inward investment into the UK stimulates domestic productivity growth, is examined. A model of productivity growth is developed for the indigenous sector of UK manufacturing, linking domestic productivity growth to theoretical explanations of inward investment. The paper demonstrates that inward investment does stimulate productivity growth in the domestic sector of around 0.75 per cent per annum. However, this cannot be attributed to investment or output spillovers, but is a result of the productivity advantage exhibited by the foreign firms.