Trade Integration, FDI, and Productivity

Policy attitude towards trade integration and foreign direct investment (FDI) is often a controversial yet popular subject. This note presents evidences from recent policy researches that arguing that engaging in an open trade and investment regime...

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Bibliographic Details
Main Authors:	Javorcik, Beata, Iacovone, Leonardo, Fitrani, Fitria
Format:	Report
Language:	English en_US
Published:	World Bank, Jakarta 2015
Subjects:	RENT SEEKING EMPLOYMENT FOREIGN ENTRY RISKS RIGHTS FOREIGN PARENT COMPANY EQUIPMENT ECONOMIC GROWTH MANUFACTURING FIRMS ACCOUNTING INTANGIBLE ASSETS CUSTOMER PRODUCTION INVESTMENT PROMOTION FOREIGN INVESTORS MATERIALS SEARCH INCOME INTEREST FOREIGN OWNERSHIP BUYER EXPECTATIONS DOMESTIC FIRMS FOREIGN PRODUCERS INDUSTRY VALUE CHAIN STRATEGIES CONSUMER GOODS INFORMATION LABOR FORCE LIQUIDITY SERVICES EXPORTS WELFARE IMAGE EFFECTS COPYRIGHT INCENTIVES INVESTMENT PROMOTION AGENCY MARKET SHARES VARIABLES MANUFACTURING SECTOR INPUTS TIME PERIOD INVESTMENT REGIME DRIVERS PRODUCTION PROCESS NEW TECHNOLOGIES DEMONSTRATION EFFECTS LINK DATA TOTAL FACTOR PRODUCTIVITY GLOBAL ECONOMY TRAINING COMPUTERS TELECOMMUNICATIONS TRANSPORT RENT HOST COUNTRIES VALUE CHAINS TARGETS MANUFACTURING INDUSTRY PRODUCTIVITY LABOR PRODUCTIVITY EXTERNALITIES FOREIGN ACQUISITION PRODUCT DESIGN MARKETING CUSTOMER SERVICE INTERNATIONAL ECONOMICS DIRECT INVESTMENT LABOR BUSINESS REGISTRATION INVESTMENT PROMOTION AGENCIES INFRASTRUCTURE IMPORT TARIFFS MANUFACTURING USERS TECHNOLOGY RD EQUITY PRODUCTIVITY GROWTH WAGES BUSINESS PLAN TECHNOLOGICAL SOPHISTICATION RESULTS VALUE COMPETITIVENESS BENCHMARKING FOREIGN DIRECT INVESTMENT BANK CREDIT FOREIGN TECHNOLOGY FAX CONSUMERS PROPERTY JOB CREATION IPA INDUSTRY PRODUCTIVITY TRADE LIBERALIZATION ECONOMICS INFORMATION PROVISION SKILLED LABOR MANAGEMENT GOVERNANCE RESULT ECONOMIC DEVELOPMENT MANUFACTURING INDUSTRIES TRADE GOODS MARKET SHARE TECHNOLOGY TRANSFER BUSINESS INVESTMENT HOST COUNTRY FDI ADVERSE IMPACT IPAS PERFORMANCE CRISES SUPPLY PRODUCT INNOVATION FOREIGN ACQUISITIONS INNOVATION MANUFACTURING SECTORS TOTAL OUTPUT CUSTOMERS SUPPLIERS AVERAGE PRODUCTIVITY PROSPECTIVE CUSTOMERS TECHNOLOGIES GOVERNMENTS TARGET AUDITING USER COMPETITION
Online Access:	http://documents.worldbank.org/curated/en/2015/12/19788891/trade-integration-fdi-productivity-policy-note-ii http://hdl.handle.net/10986/23508

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Summary:	Policy attitude towards trade integration and foreign direct investment (FDI) is often a controversial yet popular subject. This note presents evidences from recent policy researches that arguing that engaging in an open trade and investment regime have brought productivity gains which is key factor for sustaining increase in income per-capita. Evidence from Indonesia also suggests that foreign owned plants have become increasingly important, generating a significant share of exports and overall output, as well as more productive and more export intensive than domestic plants, and to spend more on RD and training. FDI also have positive impact on firms in the same sector, through competition and demonstration effects, and in upstream sectors, as suppliers to foreign-owned plants improve the quality of their own products to meet their clients more exacting needs. Evidence also suggests a positive impact from import competition in improving allocative efficiency across manufacturing plants which is a key element in driving productivity in manufacturing sector.

Trade Integration, FDI, and Productivity

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