GP - Firm productivity in India

Question 1

how can you measure TFP (total factor productivity)

Answer 1

TFP = total production/weighted average inputs

Question 2

what is the L-P approach?

Answer 2

obtaining consistent productivity estimates by using firm’s material inputs as a proxy for unobserved productivity shocks

Levinsohn-Petrin (L-P)

Question 3

what are the 2 main comparisons made in thismodel?

Answer 3

FDI from 1 )USA/Europe vs. FDI from Asia
2) FDI from developing countries vs. developed countries

Question 4

Direct Impact of FDI

name 3 negative and 3 postive impacts of FDI

Answer 4

negative:
1) local producers lose their market position
2) unfair competition
3) displace local businesses

positive:
1) GDP growth
2) Job creation
3) more training opportunities
4) diffusion of technologies

Question 5

compare the direct impacts of FDI on TFP, depending on the Country’s Origin

Answer 5

1) firms with investments from developed countries exhibit significantly higher TFP
2) acquisitions exceeding 10% ownership have a positive impact on TFP, conducted by developed countries
2) FDI from developing countries cannot show such effects on TFP

Question 6

which factors contribute to FDI’s positve impact?

briefly explain

Answer 6

• technology transfer, boosting the productivity
• knowledge spillovers as interaction brings new ideas, practices and management techniques
• improved management techniques such as organizational structures and operational processes*

Question 7

which are the 2 spillover effects?

Answer 7

horizontal & vertical (backward, forward)

Question 8

what are the foundings abt the spillover effects?

Answer 8

• horizontal: positive effects up to a certain share threshold
• backward, vertical spillover: limited impact
• forward, vertical spillover: statistically significant positive impact on downstream industries

Question 9

show the country-specific spillover effects

Answer 9

1) developed countries, espec. USA/Europe: positive, horizontal spillover effect
2) developing countries: limited impact
3) Asian Countries, espec. Japan: positive forward linkage vertical spillover effect

Question 10

3 Implications for Policymakers

Answer 10

1) Policymarks should target attracting FDI from countries with advanced technologies
2) Policies should aim to faciliate knowledge and technology transfer, fostering innovation and competitiveness
3) further research to understand the factors hindering positive spillovers from specific FDI sources