Journal of Policy Modeling 26 (2004) 627639

Foreign direct investment and growth in Nigeria An empirical investigation

A. Enisan Akinlo,1
Department of Economics, Obafemi Awolowo University, Ile-Ife, Nigeria Received 7 January 2004; accepted 15 April 2004 Available online 25 May 2004

Abstract The paper investigates the impact of foreign direct investment (FDI) on economic growth in Nigeria, for the period 19702001. The ECM results show that both private capital and lagged foreign capital have small, and not a statistically signicant effect, on the economic growth. The results seem to support the argument that extractive FDI might not be growth enhancing as much as manufacturing FDI. In addition, the results show that export has a positive and statistically signicant effect on growth. Financial development measured as M2/GDP ratio has signicant negative effect on growth, which might be due to high capital ight it generates. Finally, the results show that labour force and human capital have signicant positive effect on growth. These ndings suggest the need for labour force expansion and education policy to raise the stock of human capital in the country. 2004 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.
JEL classication: G12; H24 Keywords: FDI; Economic growth; Error correction; Nigeria

1. Introduction Measuring the effects of foreign direct investment (FDI) on economic growth occupies a substantial body of economic literature. Many theoretical and empirical

Tel.: +234 803 370 0756. E-mail address: aakinlo@oauife.edu.ng (A.E. Akinlo). 1 The author is a Visiting Research Fellow at the Institute of Developing Economies, Jetro, Japan.

0161-8938/$ see front matter 2004 Society for Policy Modeling. doi:10.1016/j.jpolmod.2004.04.011

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studies have identied several channels through which FDI may positively or negatively affect economic growth.2 However, probably due to relatively small level of foreign direct investment to Africa, when compared with other regions, e.g. Latin America and Asia, not many studies have been reported on the effects of FDI on economic growth. Moreover, most existing studies were based on economies where large share of FDI is concentrated on the manufacturing industries. No known study to our knowledge has been focused on an economy where extractive industries take the lion share of inward FDI as in the case of Nigeria.3 Several factors suggest that the indirect benets of FDI may be less in extractive especially oil industries. One, extractive sector (such as oil subsector) is often an enclave sector with little linkages with the other sectors. Two, the transfer of technology between foreign rms and domestic ones may be less in extractive industries where the technology often embodied is extremely capital intensive production. Moreover, extractive industries are subject to large economies of scale, as such, the presence of multinationals may not spur new entrants than in manufacturing. Finally, backward and forward linkages are less important in extractive FDI, as production in the natural resources sector requires fewer inputs of materials and intermediate goods from local suppliers due to its high capital intensive nature cum the fact that sales are foreign market oriented. Thus, given the pattern of FDI ows to Nigeria (mostly in oil sector) and the apprehensions as regards the benets from extractive FDI, it is imperative to examine empirically the situation in Nigeria. This, of course, constitutes the objective of this paper. The paper will complement few empirical works that have been done on the subject matter in the case of Africa. More importantly, it will provide evidence on whether or not extractive FDI leads to growth as many empirical studies have demonstrated in the case of manufacturing FDI. The remaining discussion is organized into four sections. In Section 2, a brief summary of theoretical and empirical issues on the relationship between FDI and growth is provided. The specication of the model is contained in Section 3. Section 4 provides the empirical results. The last section contains the concluding remarks. 2. Theoretical and empirical issues 2.1. Theoretical issues Several studies have articulated theoretically and empirically the ways in which inward FDI can contribute to the growth of the host countries economy. Theoreti2 For a detailed literature survey, see Akinlo (2003), Buckley et al. (2002) and de Mello (1997, 1999) among others. 3 Over the years, Nigeria and Angola have been two most successful countries in attracting FDI because of their comparative location in oil despite their unstable political and economic environment. A large proportion of inward inows to these countries are concentrated in the oil sector.

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cally, some identied channels include increased capital accumulation in the recipient economy, improved efciency of locally owned host country rms via contract and demonstration effects, and their exposure to erce competition, technological change, and human capital augmentation and increased exports.4 However, the extent to which FDI contributes to growth depends on the economic and social condition or in short, the quality of environment of the recipient country (Buckley, Clegg, Wang, & Cross, 2002). This quality of environment relates to the rate of savings in the host country, the degree of openness and the level of technological development. Host countries with high rate of savings, open trade regime and high technological product would benet from increase FDI to their economies. In addition, FDI may have negative effect on the growth prospect of the recipient economy if they give rise to a substantial reverse ows in the form of remittances of prots, and dividends and/or if the transnational corporations (TNCs) obtain substantial or other concessions from the host country.5 2.2. Empirical evidence Many empirical works have been provided on the causal relationship between FDI and growth. At the rm level, several studies provided evidence of technological spillover and improved plant productivity.6 At the macro level, FDI inows in developing countries tend to crowd in other investment and are associated with an overall increase in total investment.7 Most studies found that FDI inows led to higher per capita GDP, increase economic growth rate and higher productivity growth. Other channels identied in empirical works through which FDI bolstered growth include higher export in host country and increased backward as well as forward linkages with afliates to multinationals (Markusen & Venables, 1999). However, the productivity of foreign capital is dependent on initial conditions of host country. These conditions include introduction of advanced technology and the degree of absorptive capacity in the host country; sufciently high level of human capital in a recipient economy and some degree of complimentarity between domestic investment and FDI; high savings rate and open trade regimes. Essentially, what the above reviewed empirical studies suggest is that ways in which FDI affect growth depends on the economic and technological conditions of the host country. However, in general most of the existing studies were focused mainly on economies with high manufacturing FDI. Whether the same ndings
4 Evidence of this is provided in the works of Aitken, Hanson, and Harrison (1997) and Blomstrom and Kokko (1997, 1998). 5 Details of this negative effect could be found in Ramirez (2000). 6 These studies include the works of Aitken and Harrison (1999) and Weinhold and Klasen (1991) among others. 7 Some case studies and related discussions are reported in UNCTAD, World Investment Report (1992).

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are true of extractive FDI is an empirical issue which this study attempts to explore using Nigeria as a case study.

3. The model We begin by specifying a production function in which foreign direct investment is explicitly incorporated as a factor of production:8 Yt = Af {(L), Kp , } = At (L) Kp , 1 ,

where = H z

(1)

Yt is real output, Kp is private capital stock, L is raw labour input, is the level of human capital, H is the measure of educational level, z is the return to education relative to raw labour input, A is the efciency of production, E is the externality generated by additions to the stock of FDI, and are the private capital and labour shares, respectively. It is assumed that and are less than one, such that there are diminishing returns to the labour and capital inputs. The externality, , can be represented by a CobbDouglas function of the form:
} = {(L), Kp , Kf

(2)

where and are, respectively, the marginal and the intertemporal elasticities of substitution between private and foreign capital. Let > 0, such that a larger stock of FDI yields a positive externality to the economy. If > 0, intertemporal complimentarity prevails and, if < 0, additions to the FDI stock crowd out private capital over time and diminish the growth potential of the host country.9 If we combine Eqs. (1) and (2), we obtain:
Yt = At (L) Kp [{(L), Kp , Kf }}]1

(3)

If we factor out Eq. (3), we obtain: Yt = At (L)+(1) Kp

+(1)

Kf

(1)

(4)

Substituting = Hz and taking logarithms and time derivatives of Eq. (4) we generate the following dynamic production function: y = A + z[ + (1 )]H + [ + (1 )]L + [ + (1 )]Kp + [(1 )]Kf (5) where is the growth rate of i = Y, A, L, H, Kp and Kf . Eq. (5) says that given and > 0 and z is also positive, additions to stock of FDI will augment the elasticities of output with respect to raw labour, capital and human capital by factor (1 ).
8 A variant of this model has been used by previous researchers such as de Mello (1997) and Ramirez (2000). However, unlike most previous ones that used only raw labour, we introduced human capital in our model to ascertain its impact on growth. This is considered because in most cases FDI requires high-level manpower to work with in host country. 9 The same argument have noted in the work of Borsworth and Collins (1999) and Ramirez (2000).

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Hence derived from Eq. (5) above, the equation estimated in our case takes the form: y = d0 + d1 l + d2 kp + d3 kf + d4 h + d5 x + d6 cg + d7 Bg + d8 Fn + d9 D + d10 T + (6) Lower case letters denote natural logarithms, and is the difference operator; y is the natural log of real GDP; l is the labour, kp and kf are stock of private and foreign capital respectively; cg is real government consumption, x is real export, h is human capital proxied by the share of university, polytechnics and colleges of education students in the population, D is the adjustment dummy, 1 for adjustment period 19862001 and 0 otherwise, Fn stands nancial depth measured as ratio of money supply broadly dened to GDP, Bg is budget balance over GDP. T is the time trend to capture secular trend in output during the period of study. We have included few other variables to determine their impacts on the growth of the economy. We anticipate that d1 , d2 , d4 , d5 and d7 will be positive; d3 is indeterminate. If accretions of foreign capital stock complement private capital formation, it will have positive sign, otherwise negative. d6 is also indeterminate depending on whether or not government expenditure crowds out private consumption. If government expenditure crowds out private consumption expenditures, d6 will be negative. However, where government consumption compliments private consumption d6 will be positive. d8 is also indeterminate, depending on whether nancial development reduces or increases capital ight. If it increases capital ight, it will have negative sign. If it reduces capital ight, it will have positive value. d9 is also indeterminate, depending on the way the adjustment works. Where adjustment enhances efciency, as it should, the sign should be positive. However, where it fails, as in the case of Nigeria, it could be negative. d10 can be positive or negative depending on whether annual growth rate in the country increased or decreased over the period under consideration. 4. Empirical results 4.1. The estimation techniques and presentation of estimation In order to do any meaningful policy analysis with the results, it is important to distinguish between correlation that arises from a share trend and one associated with an underlying causal relationship. To achieve this, our data were tested for a unit root (nonstationarity) by using the Augmented DickeyFuller test (ADF) (Dickey & Fuller, 1981) with a constant and a deterministic trend. The results of the ADF test are as presented below 1. The results in Table 1 show that all the variables are integrated of order one, I(1). Having established that the variables are I(1), we then applied the JohansenJuselius (1990) technique to determine whether there is at least one linear combination of

632 Table 1 Variables

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Levels

First difference

Critical value (5%)

Critical value (1%)

Panel (A): Nigeria: unit root tests for stationarity with constant and time trend, sample period 19702001 3.58 4.29 y 1.84 3.27a l 3.50a 4.97 3.58 4.29 3.58 4.29 h 1.08 3.41a 2.54 3.97 3.58 4.29 kp 1.78 3.33a 3.58 4.29 kf x 2.61 3.99 3.58 4.29 2.54 4.29 bg 3.58 4.29 3.58 4.29 fn 0.38 4.24 2.61 3.97 3.58 4.29 cg Panel (B): Nigeria: unit root tests for stationarity with constant only, sample period 19702001 y 0.65 3.07 2.97 3.68 l 2.95 4.80 2.97 3.68 2.97 3.68 h 2.62 3.12 0.30 3.99 2.97 3.68 kp kf 0.58 3.40 2.97 3.68 x 2.43 4.08 2.97 3.68 2.39 4.38 2.97 3.68 bg 2.97 3.68 fn 0.70 4.33 cg 1.77 3.87 2.97 3.68 Notes. Mackinon critical values for rejection of hypothesis of a unit root. a Variable is stationary at the 10% level. Denotes signicance at the 5% level Denotes signicance at 1% level.

these variables that is I(0).10 The results of the -max and the trace tests are as shown in panel A of Table 2. The co-integrating equation (normalized on the growth variable) is as shown in panel B of Table 2. The results in panel A of Table 2 shows that the null hypothesis of no co-integration i.e. 0 can be rejected either using -max or the trace tests statistics. They are both greater than their critical values. The co-integrating equation (normalized on growth variable) shown in panel B of Table 2 indicates that raw labour and private capital have negative sign while foreign capital and human capital are positive (the sign are reversed because of the normalization process). The coefcients are all signicant as shown by the t-ratios indicated in parentheses.11
10 Given that a co-integrating relationship is present among the selected variables in level, an error correction (EC) model can be estimated that is, a model that combines both the short-run properties of the economic relationships in the rst difference form as in Eq. (6), as well as the long-run information provided by the data in level form. 11 The reported results here are without constant. However, as an additional exercise, we included a constant term in the procedure and carried out the entire analysis, the results obtained were not signicantly different.

A.E. Akinlo / Journal of Policy Modeling 26 (2004) 627639 Table 2 Co-integration results (with a linear trend) where r is the number of co-integrating vectors Panel (A): Estimates of -max and trace tests Null Alternative r -max Critical value(95%) 0 1 2 3 4 1 2 3 4 5 48.84 28.41 16.68 7.13 0.12 33.46 27.07 20.97 14.07 3.76 kf 0.134 (6.20) Trace 96.17 52.34 23.93 7.25 0.12

633

Critical value (95%) 68.52 47.21 29.68 15.41 3.76

Panel (B): Estimates of co-integrating vector y l h kp 1.000 0.764 (6.32) 0.104 (9.56) 0.019 (1.96) Note. t ratios are in parentheses.

Next we use the information provided by the L.R. tests to generate a set of EC models that capture the short- and long-run behaviour of the output relationship. The changes in the relevant variables represent short-run elasticities, while the coefcients on the EC term represents the speed of adjustment back to the long-run relationship among variables. Table 3 provides the results for the output growth relationship for the period 19702001. The results show that foreign capital only has positive impact on growth in Nigeria after a considerable lag and it is not signicant.12 This result seems to support our argument that extractive FDI might not be growth inducing as much as manufacturing FDI. This result should not come as surprise because the oil sector where the lion share of FDI is concentrated in Nigeria is highly disconnected from the economy.13 Contemporaneous private capital has positive effect but not signicant. The insignicance of private capital might be due to small nature of private investment in the economy. Over the years, the economy has been dominated by the government sector. This was a result of the discovery of oil in large quantities in 1970s. Government realized a lot of revenue from oil and as such dabbled into almost all the activities that are better provided by the private business actors thereby crowding out private investment.14 Growth rate of real export has signicant positive effect on growth.15 The results show that labour and human capital have signicant positive effects on economic growth.16 The results seem to demonstrate the importance of labour
In fact, the contemporaneous and the rst lag of foreign capital have negative sign. Several other studies have noted the enclave nature of the Nigeria oil sector (see Iwayemi, 1995). 14 Government attempt at reversing the situation was put in place in 1986 with the implementation of the structural adjustment programme, which incorporated such policies as nancial liberalization, stabilization and privatization. 15 Empirical studies by previous researchers equally indicated positive relationship between export and growth (see the work of Feder, 1983; Moschos, 1989 and Ram, 1987 among others). 16 The large literature on growth stemming from the works of Barro (1991, 1997) and Gemmel (1996) have consistently found some measure of human capital signicant in determining growth. It must however, be pointed out that Bils and Klenov (2000) and Easterly and Levine (2000) among others have argued that factor accumulation is not the key to growth.
13 12

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Table 3 Nigeria: Error Correction Model (dependent variable OLS regressions Variables Constant ln Lt ln Ht ln Kp ln Kft3 ln Kft4 ln Kft5 ln X ln Cgt1 Fn D Bg T Ect1 R 2 S.E. D.W. AR (1) 1 0.21 (2.50) 0.11 (1.59) 0.05 (2.13) 0.008 (0.62) 0.01 (0.007) 2

ln Yt ) A.E. Akinlo / Journal of Policy Modeling 26 (2004) 627639

3 0.22 (1.84) 0.02 (1.54) 0.004 (0.40) 0.01 (0.41) 0.24 (3.48) 0.13 (2.13) 0.07 (2.87) 0.01 (0.43) 0.03 (0.43)

4 0.24 (3.92) 0.14 (2.16) 0.07 (2.76)

5 0.29 (2.93) 0.16 (1.47) 0.08 (2.36)

6 0.28 (3.08) 0.17 (2.18) 0.08 (2.63)

0.001 (0.06) 0.02 (1.05) 0.05 (0.97) 0.03 (4.71) 0.004 (0.058) 0.007 (3.82) 0.32 (3.74) 0.60 0.008 1.70 0.18 0.10 (1.51) 0.03 (3.23) 0.001 (0.71) 0.005 (2.15) 0.28 (2.07) 0.59 0.009 1.70 0.43 0.005 (0.08) 0.03 (5.44) 0.002 (0.32) 0.03 (4.22) 0.001 (0.47) 0.01 (3.26) 0.38 (3.20) 0.55 0.008 1.88 0.17 0.001 (0.13) 0.03 (5.27) 0.001 (0.64) 0.01 (4.09) 0.38 (4.11) 0.60 0.008 1.80 0.02 (1.20)

0.33 (3.99) 0.58 0.01 1.75 0.11

0.01 (4.74) 0.32 (4.52) 0.60 0.008 1.70

Note. t statistics in parentheses. All variables are as dened earlier.

A.E. Akinlo / Journal of Policy Modeling 26 (2004) 627639 Table 4 Nigeria: Forecast Evaluation for Error correction Models Equation Sample: 19702001 Root mean square error (RMS) Mean absolute error (MAE) Theil inequality coefcient (TIC) Bias proportion (BP) Variance proportion (VP) Covariance proportion (CP) Sample : 19701996 RMS MAE TIC BP VP CP Sample : 19802001 RMS MAE TIC BP VP CP 3 0.1044 0.0866 0.0042 0.0001 0.1207 0.8773 0.1042 0.0851 0.0044 0.0229 0.0181 0.9588 0.1266 0.1126 0.0049 0.1407 0.2209 0.6383 4 0.0899 0.0736 0.0036 0.0013 0.0870 0.9116 0.0909 0.0743 0.0038 0.0195 0.0092 0.9711 0.1004 0.0878 0.0039 0.0525 0.1657 0.7816 7

635

0.0966 0.0776 0.0039 0.0010 0.0645 0.9344 0.0970 0.0771 0.0040 0.0218 0.0006 0.9774 0.1089 0.0944 0.0042 0.0312 0.1406 0.8281

Note. Forecast evaluation estimates generated with EVIEWS 4.0.

and education on the growth prospect of the Nigerian economy. It might be that in Nigeria, the efciency with which the stock of technical knowledge is translated into technologies in the market, via the higher education system has increased particularly with the reforms. Also, it could be that the personnel management systems in rms and enterprises allow well-educated employees to contribute meaningfully to the enterprises.17 Lagged government consumption has negative sign suggesting that government expenditure crowds out private consumption however, rm statement cannot be made on this as the coefcient is not signicant. Our measure of nancial development has signicant negative sign in all the reported regressions. This suggests that nancial development adversely affected growth during the period under consideration. It could be that nancial deepening encourages capital ight by facilitating international capital transfers. Since the nancial markets have been liberalized and the international market deregulated, the domestic capital might have moved abroad where risk-adjustment returns are higher.18 Budget
17 It must be pointed out that the introduction of export variable counterbalanced labour variable. The two are largely offsetting with the result the coefcient of labour becomes insignicant. 18 The study by Lensink, Hermes, and Maurinde (1998) actually found a negative and signicant effect of demand deposit on capital ight. However, Collier, Hoefer, and Pattillo (2001) using M2/GDP ratio as a measure of nancial deepening nd that it has no statistically signicant effect.

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balance over GDP has positive sign but not signicant. It is possible that improved scal performance especially with introduction of reforms in mid 1980s allowed the real exchange rate to converge towards its equilibrium path and this policy mix by accelerating output growth generated an endogenous improvement in the budget balance.19 This is suggestive as the coefcient is not signicant. The time trend has signicant positive trend. This possibly reects the slight growth experienced during the period under consideration. The dummy variable has negative sign but not signicant. The relative t and efciency of EC regression is averagely alright, and as the theory predicts, the EC terms are negative and signicant in most of the reported equation in Table 3. Using regression formulation 6, the EC shows that a deviation from long-run growth this period is corrected by about 38% in the next year. We conducted stability tests to determine whether the null hypothesis of no structural break could be rejected at 5%. The Chow breakpoint tests suggested that the hypotheses could not be rejected for signicant year 1983 (P = .114), 1986 (P = .0126), and 1992 (P = .1146). The EC models were equally used to track the historical data on economic growth in Nigeria. Theil inequality coefcient obtained from historical simulation of the growth Eqs. (2), (4) and (6) are as shown in Table 4. The results show the forecasting power of the models is relatively good as the Theil inequality coefcients are less than 0.3.20 Moreover other statistics as shown in Table 4 exhibit good performance as are close to their ideal values.

5. Concluding remarks The links between FDI and growth has been examined. FDI in Nigeria only has a positive effect on growth after a considerable lag. The results suggest that extractive FDI especially oil might not be growth enhancing as much as manufacturing FDI. Also, it is found that export, labour and human capital are positively related to growth. In addition, the results show that private capital has insignicant positive effect on growth. The question, then, is what are the policy implications of these ndings for the Nigerian economy? One, the results show that the growth would be enhanced if FDI inows are channeled into sectors other than the oil sector. Government needs to provide appropriate environment to attract manufacturing FDI. Such measures as relaxation or elimination of restrictions on prots and capital remittances, opening of formerly priority sectors to investors and provision of adequate security among
19 In addition, where reduction in the budget decit facilitates private sectors access to bank credit economic activity could be stimulated. 20 In general, the forecasting power of a model is adjudged to be relatively good if the coefcient is below .3 (Theil, 1966).

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others should be put in place. However, efforts should be made to ensure that the positive spillover effects associated with FDI offset the short term costs associated with the implementation of these incentives. Once the reverse ows of prots and capital are deducted from the gross inows of FDI into the country, the contribution of FDI to the nancing of private capital formulation may be highly jeopardized. It should be emphasized that the country could benet from increased FDI inows into the oil sector if the sector is integrated into the economy. A major policy in this direction is the liberalization of the oil sector. This will lead to increased private participation, higher employment with possible multiplier effects on the economy as a whole. As a matter of fact, the results suggest reduction in government size in the economy. This is better achieved through privatization of most government owned enterprises in the country. It will engender competition and greater efciency. All the same, caution should be exercised to ensure that the necessary conditions for privatization are in place so as to avoid the failure experienced during the rst privatization exercise in 1988. Government needs to provide the legal and administrative framework for effective privatization. More importantly, there is the need to ensure transparency in the exercise. The results equally suggest the need to increase export for greater growth performance. Undoubtedly, development policies that aimed at ensuring greater private (domestic and foreign) participation in the economy will lead to increase in exports. This tends to buttress the argument that the economy needs to be opened up through increased private participation. For example, foreign investors participating in the debt conversion programme could be encouraged to direct their investments to projects that signicantly increased production capacity, incorporate new technologies in the export sector, and improve the countrys infrastructure. Finally, the negative sign of M2/GDP ratio possibly suggests the need to stem the problem of capital ight in the country. Steps to level the legal and administrative playing eld for domestic investors and to promote a stable macroeconomic environment could contribute to stemming capital ight. The country must endeavor to keep legitimate private capital at home by encouraging domestic investment. However, much more than this, policies to encourage private holders of external assets to repatriate their capital should be implemented. These possibly might include tax amnesties and raising the domestic interest rate. It needs be pointed out, however, that these policies could have adverse effects on already weak private sector in the economy. The ndings on human capital point to the need for Nigeria to follow an educational policy to raise stock of human capital. In sum, policies that facilitate closer integration of the oil sector to the economy, greater openness, and increased private participation will no doubt lead to higher exports, greater spillover from FDI inows and higher economic growth in the country.

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Appendix A A.1. Sources of data Source (a) Source (b) Source (c) Source (d) International Monetary Fund, International Financial Statistics Yearbook (various years) World Bank, World Development Indicators (various years) Central Bank of Nigeria (CBN), Nigerias Principal Economic and Financial Indicators (various years) African Development Bank, Selected Statistics on African Countries (2000)

A.2. Description and measurements of variables Y Kp Kf Real output (measured as real GDP) Private capital stock (private investment) Stock of foreign investment. The estimates of Kp and Kf were generated using standard perpetual inventory model of the form: Kt = Kt 1 + It Kt 1 , where Kt 1 is the stock of capital at time t 1. It is the ow of gross investment during period t, and is the rate at which private and foreign capital depreciates in period t 1. In this work, the initial stocks of private and foreign capital were estimated by aggregating over 10 years of gross investment 19611970. We adopted 10 years initial stock in view of the political crisis that engulfed the country between 1965 and 1970, which actually made investment almost zero during the period. However, apart from 5% rate of depreciation, we used 10, the results were not signicantly different. Human capital measured as share of university, polytechnics and colleges of education students in the population Economically active labour force Real export Government budget balance over GDP Real government consumption Time trend Financial development variable measured as ratio of money supply broadly dened over GDP (M2/GDP). M2 is narrow money (M1) gures added to quasi-money. All real variables were obtained by deating nominal values by CPI.

H L X Bg Cg T Fn

References
Aitken, B. J., Hanson, G. H., & Harrison, A. E. (1997). Spillovers, foreign investment, and export behaviour. Journal of International Economics, 43, 103132. Aitken, B. J., & Harrison, A. E. (1999). Do domestic rms benets from direct foreign investment? American Economic Review, 89, 605618.

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