PhD Defense: FDI Spillovers in developing countries

Dea Tusha will defend her PhD thesis FDI spillovers in developing countries: channels, conditions, challenges online.

Dea Tusha’s PhD thesis focuses on productivity spillovers from Foreign Direct Investment (FDI) in developing countries. Using firm level microeconomic data from Indonesia, Vietnam and Moldova she investigated the divergence in findings in the FDI spillovers literature. Her findings suggest that different FDI spillover effects can be a result of underlying differences in firm characteristics, business environment conditions and the political and economic context of the country under study.

At the same time, differences are also driven by measurement and data issues, such as different data sources and incomplete datasets. Based on these findings, several important implications for policy and future empirical research arise. 
 

• First, there is a potential for positive spillovers from foreign firms, especially to their domestic suppliers, but for this, foreign firms need to be embedded in the local economy. 
• Second, spillovers happen in a political and business environment that encourages FDI, through channels like linkages along the supply chain and flexible labour markets. Hence, it is important to develop the right business environment for these channels to function properly. 
• Third, it is difficult to assess the effects of FDI on local economies of developing countries with insufficient or unreliable data. 

Future research on FDI spillovers needs to rely on accurate measures of FDI participation, and a universal methodology to measure FDI would reduce confounding factors in estimations.

Dea Tusha MSc is postdoc at the Vienna University of Economics, consultant at the World Bank and a PhD student of Utrecht University School of Economics (U.S.E.).