DEPOCEN Working Paper Series
Toan Thang TRAN, Thi Song Hanh PHAM, 2013. "Spatial Spillovers of Foreign Direct Investment: The Case of Vietnam"
In an effort to unlock the black box of mixed empirical evidence for productivity spillovers from foreign direct investment in host countries, this paper, using the case of Vietnam, examined the role of geographical proximity and inter firm interaction in determining productivity spillovers of FDI. The spatial productivity model specified based on the empirical spillovers literature and spatial econometric model. This paper confirms negative effect of horizontal spillovers. The distance and interaction are confirmed to be two determinants of the significance of spillover effects. The paper finds the positive backward and negative forward spillovers. Indirect effect (or the inter-regional spillovers) is found about twice to four times higher than the direct effect (or the intra-regional spillovers) but such kind of indirect effect is quickly attenuated for a certain distance. The paper also finds the evidence of the effect arising from the social interaction among local firms in productivity spillovers. The testing results suggest that local firm's productivity is substantially driven by the agglomeration effect and the presence of interand intra-regional FDI.
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