Work detail

FDI and the spillover effect analysis: the case of Ethiopia

Author: Mgr. Abeba Nigussie Turi, M.Sc.
Year: 2014 - summer
Leaders: PhDr. Pavel Vacek Ph.D.
Work type: Masters
Language: English
Pages: 74
Awards and prizes: M.A. with distinction from the Dean of the Faculty of Social Sciences for an excellent state-final examination performance.
Abstract: This thesis presents the spilling over effect resulting from the foreign direct investment with a
focus on the manufacturing firms. It covers extensive econometric analysis based the Central
Statistics Agency’s (CSA) survey on the manufacturing firms and an Input-Output matrix done
by the Ethiopian Development Research Institute (EDRI). A pooled, Fixed and Random Effect
estimation techniques are employed for estimating the log transferred production function
augmented for the spillover proxies: Backward, Forward and Horizontal. Yet, as is stated in a lot
of literatures like that of Javorcik (2004), the Cobb–Douglas production function suffers from the
endogeneity problem and there is a need for a better estimation technique that can capture and
solve this problem. As a result, I also used the Levinsohn-Petrin estimation technique, which
used intermediate inputs as a proxy for unobservable shocks and the residuals from this estimate
used as a measure of total factor productivity (TFP) of the firm. The TFP analysis from the LP
estimation suggests that a one percentage point increase in the foreign presence in the
downstream sectors is associated with the 1.1 percent rise in the total output of each supplying
industries. Likewise, a one percentage point increase in the weighted share of output in the
upstream (or supplying) sectors produced by firms with foreign capital participation is associated
with the 1.2 percent decline in the total output. Yet, I have not found any significant Horizontal
spillover effect.
August 2022




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