Many countries compete against one another in attracting foreign investors by offering ever more generous incentive packages and justifying their actions with the productivity gains that are expected to accrue to domestic producers from knowledge externalities generated by foreign affiliates. Despite this being hugely important to public policy choices, there is little conclusive evidence indicating that domestic firms benefit from foreign presence in their sector. It is possible, though, that researchers have been looking for foreign direct investment (FDI) spillovers in the wrong place. Multinationals have an incentive to prevent information leakage that would enhance the performance of their local competitors in the same industry but at the same time may want to transfer knowledge to their local suppliers in other sectors. Spillovers from FDI may be, therefore, more likely to take place through backward linkages-that is, contacts between domestic suppliers of intermediate inputs and their multinational clients-and thus would not have been captured by the earlier literature. This paper focuses on the understudied issue of FDI spillovers through backward linkages and goes beyond existing studies by shedding some light on factors driving this phenomenon. It also improves over existing literature by addressing several econometric problems that may have biased the results of earlier research. Based on a firm-level panel data set from Lithuania, the estimation results are consistent with the existence of productivity spillovers. They suggest that a 10 percent increase in the foreign presence in downstream sectors is associated with 0.38 percent rise in output of each domestic firm in the supplying industry. The data indicate that these spillovers are not restricted geographically, since local firms seem to benefit from the operation of downstream foreign affiliates on their own, as well as in other regions. The results further show that greater productivity benefits are associated with domestic-market, rather than export-oriented, foreign affiliates. But no difference is detected between the effects of fully-owned foreign firms and those with joint domestic and foreign ownership. The findings of a positive correlation between productivity growth of domestic firms and the increase in multinational presence in downstream sectors should not, however, be interpreted as a call for subsidizing FDI. These results are consistent with the existence of knowledge spillovers from foreign affiliates to their local suppliers, but they may also be a result of increased competition in upstream sectors. While the former case would call for offering FDI incentive packages, it would not be the optimal policy in the latter. Certainly more research is needed to disentangle these two effects.

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Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages

The theory of environmental policy

We estimate the World Distribution of Income by integrating individual income distributions for 138 countries between 1970 and 2000. Country distributions are constructed by combining national accounts GDP per capita to anchor the mean with survey data to pin down the dispersion. Poverty rates and head counts are reported for four specific poverty lines. Rates in 2000 were between one-third and one-half of what they were in 1970 for all four lines. There were between 250 and 500 million fewer poor in 2000 than in 1970. We estimate eight indexes of income inequality implied by our world distribution of income. All of them show reductions in global inequality during the 1980s and 1990s.

/pdf/the-world-distribution-of-income-falling-poverty-and-3vnxgqp1p0.pdf

The World Distribution of Income: Falling Poverty and … Convergence, Period

Handbook of Quantitative Science and Technology Research

This paper examines the wide-spread practice where data envelopment analysis (DEA) efficiency estimates are regressed on some environmental variables in a second-stage analysis. In the literature, only two statistical models have been proposed in which second-stage regressions are well-defined and meaningful. In the model considered by Simar and Wilson (J Prod Anal 13:49–78, 2007), truncated regression provides consistent estimation in the second stage, where as in the model proposed by Banker and Natarajan (Oper Res 56: 48–58, 2008a), ordinary least squares (OLS) provides consistent estimation. This paper examines, compares, and contrasts the very different assumptions underlying these two models, and makes clear that second-stage OLS estimation is consistent only under very peculiar and unusual assumptions on the data-generating process that limit its applicability. In addition, we show that in either case, bootstrap methods provide the only feasible means for inference in the second stage. We also comment on ad hoc specifications of second-stage regression equations that ignore the part of the data-generating process that yields data used to obtain the initial DEA estimates.

/pdf/two-stage-dea-caveat-emptor-2ity5jdsui.pdf

Two-Stage DEA: Caveat Emptor

The challenge of the econometric problem in production efficiency analysis is that the efficiency scores to be analyzed are unobserved. Statistical properties have recently been discovered for a type of estimator popular in the literature, known as data envelopment analysis (DEA). This opens up a wide range of possibilities for well-grounded statistical inference about the true efficiency scores from their DEA estimates. In this paper we investigate the possibility of using existing tests for the equality of two distributions in such a context. Considering the statistical complications pertinent to our context, we consider several approaches to adapting the Li test to the context and explore their performance in terms of the size and power of the test in various Monte Carlo experiments. One of these approaches shows good performance for both the size and the power of the test, thus encouraging its use in empirical studies. We also present an empirical illustration analyzing the efficiency distributions of countries in the world, following up a recent study by Kumar and Russell (2002), and report very interesting results.

/pdf/on-testing-equality-of-distributions-of-technical-efficiency-3l5r266h9v.pdf

On Testing Equality of Distributions of Technical Efficiency Scores

On aggregate Farrell efficiencies

The challenge of the econometric problem in production efficiency analysis is that the very efficiency scores to be analyzed are unobserved. Recently, statistical properties have been discovered for a class of estimators popular in the literature, known as data envelopment analysis (DEA) approach. This opens a wide range of possibilities for a well-grounded statistical inference about the true efficiency scores from their DEA-estimates. In this paper we investigate possibility of using existing tests for equality of two distributions for such a context. Considering statistical complications pertinent to our context, we consider several approaches to adapt the Li (1996) test to the context and explore their performance in terms of the size and the power of the test in various Monte Carlo experiments. One of these approaches showed good performance both in the size and in the power, thus encouraging for its wide use in empirical studies.

On testing equality of distributions of technical efficiency scores

In this study, we look for empirical support for the hypothesis that there is a positive relationship between the levels of corporate governance quality across firms and the relative efficiency levels of these firms. This hypothesis is related to Liebenstein's idea of X-efficiency. We use the data envelopment analysis (DEA)estimator to obtain proxies for X-[in]efficiency of firms in our sample and then analyze them with respect to different ownership structures by comparing distributions and aggregate efficiencies across different groups. We also use truncated regression with bootstrap, following Simar and Wilson (2003), to infer on relationship of inefficiency to various indicators of quality of corporate governance, ownership variables, as well as industry and year specific dummies. The data is coming from 7 industries in Ukraine.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID886105_code574037.pdf?abstractid=886105

Corporate Governance and Firm's Efficiency: The Case of a Transitional Country, Ukraine

In this study, we look for empirical support for the hypothesis that there is a positive relationship between the levels of corporate governance quality across firms and the relative efficiency levels of these firms. This hypothesis is related to Leibenstein's idea of X-efficiency. We use the data envelopment analysis (DEA) estimator to obtain proxies for X-[in]efficiency of firms in our sample and then analyze them with respect to different ownership structures by comparing distributions and aggregate efficiencies across different groups. We also use truncated regression with bootstrap, following Simar and Wilson Estimation and influence in two stage, semi-parametric models of production process, Simar and Zelenyuk (2003) to infer on relationship of inefficiency to various indicators of quality of corporate governance, ownership variables, as well as industry and year specific dummies. The data is coming from seven industries in Ukraine.

/pdf/corporate-governance-and-firm-s-efficiency-the-case-of-a-3nhgj2fuom.pdf

Valentin Zelenyuk

Papers

On Testing Equality of Distributions of Technical Efficiency Scores

On aggregate Farrell efficiencies

On testing equality of distributions of technical efficiency scores

Corporate Governance and Firm's Efficiency: The Case of a Transitional Country, Ukraine

Corporate governance and firm's efficiency: the case of a transitional country, Ukraine ∗