Productivity and foreign direct investment in the services sector: an econometric analysis

Abstract

Purpose: Our study seeks to measure the impact of Foreign Direct Investments (FDI) in the services sector on the productivity of municipalities in the state of São Paulo. Theoretical framework: FDI in the services sector has become increasingly important for emerging economies due to the spillover effects, which can boost regional economic development. Methodology/Approach: This study uses econometric modeling to measure the impact of services FDI at the municipal level in the state of São Paulo, the most FDI-intensive region in Brazil. To do so, this study employs an unbalanced panel of data that includes all FDI-receiving municipalities in the state between 2010 and 2016. Findings: Our results point to a positive relationship between FDI in services sectors and municipal productivity. Research, practical & social implications: This study outcomes offer valuable perspectives for the formulation of public policies aimed at attracting foreign investments. They also have important implications for the service sector and could be a reference for future studies on the subject. Originality/ Value: This study addresses FDI in emerging countries, an important discussion given the impact of this type of investment on economic development and social indicators. In addition, this paper expands the FDI literature beyond the manufacturing sector. Keywords: Foreign Direct Investment; Foreign Direct Investment in Services; Spillovers; Productivity.