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The Direct Contribution of FDI to Productivity Growth in Britain, 1997–2008
Author(s) -
Harris Richard,
Moffat John
Publication year - 2013
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12059
Subject(s) - total factor productivity , productivity , economics , estimation , aggregate (composite) , foreign direct investment , agricultural economics , foreign ownership , international trade , monetary economics , econometrics , macroeconomics , management , materials science , composite material
Abstract This paper considers the contribution of foreign‐owned plants and firms to aggregate total factor productivity ( TFP ) growth in Britain for 1997–2008 using data from the Annual Respondents' Database. The contribution of different sub‐groups is further decomposed to show the role of continuing plants vis‐à‐vis reallocations in output shares. TFP is calculated using system GMM estimation. Taking into account the smaller initial size of the foreign‐owned sector in 1997, foreign‐owned plants contributed relatively more to aggregate productivity growth than UK ‐owned plants over the period. This strong performance is mostly the result of reallocations of output shares towards high productivity continuing plants and the opening of high productivity plants.