FDI Promotion Policy and Comparative Advantage

28  November 2013    4:00 pm CET

Beata Smarzynska Javorcik
University of Oxford, CEPR, CESifo

In cooperation with:


wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (library (2nd floor))


Can industrial policy affect the country’s comparative advantage? This study argues that FDI promotion policy is an effective way of shaping the national export structure. We combine product-specific revealed comparative advantage (RCA) indicators with time-varying information on sectors receiving priority status in national FDI promotion efforts during the period 1984-2006. We find a positive and statistically significant relationship between investment promotion efforts and RCA in developing countries. The new Exporter Dynamics Database from the World Bank allows us to further analyse the effects of investment promotion polices across the distribution of firms. The results show that investment promotion efforts are associated with higher values of exports across the distribution of exporters. They also appear to be positively correlated with the firms’ export values, regardless of their initial size in foreign markets, and with the number of export destinations

This seminar series is an activity in the framework of FIW ('Forschungsschwerpunkt Internationale Wirtschaft'), which is a project designed to build a center of excellence in research on International Economics, funded by the Austrian Ministry of Economics, Family and Youth..

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Keywords: FDI promotion, RCA, exports promotion

JEL classification: F10, F14, F23, F68