Spillover Effects from Inward FDI on the Exporting Decisions of Chilean Manufacturing Plants

Abstract

We study the presence of spillover effects on three exporting decisions (likelihood, quantity, propensity) of Chilean manufacturing firms during the period 2001–2004. Evidence suggests that Chilean firm’s export likelihood is positively affected by other domestic firms’ exports. In contrast, exports by MNEs operating in Chile negatively affect Chilean firm’s export likelihood, although MNE-employment generates positive spillover effects, suggesting externalities in human capital. We also find evidence of spillovers from MNE activity on the proportion of production the firm exports (export propensity), but not on how much they decide to export (export quantity).

Appendix

1.1 A. Best response functions linearization

According to Eq. 6, we have that

$$\label{qf1A} q_{fj}=\frac{p_f(Q_f^{-j}) - a q_{dj} - c_f - g}{2\beta_f + a + b_f}=\frac{\alpha_f - \beta_f Q_f^{-j} - a q_{dj} - c_f - g}{A}, $$

(16)

where A = 2β _f  + a + b _f .

Now, we assume c _f (X,Z _f ,Γ _EX ,Γ _MNE ) and g(X) can be expressed in linear form as

$$\label{cf_linear} c_f=w_1'X+w_2'Z_f+w_3\Gamma_{EX}+w_4\Gamma_{MNE}, $$

(17)

$$\label{g_linear} g=w_5'X, $$

(18)

and substituting Eqs. 17 and 18 into Eq. 16, we have that

$$ q_{fj}= \frac{\alpha_f}{A} - \frac{\beta_f}{A}Q_f^{-j} - \frac{a}{A}q_{dj} - \frac{w_1'+w_5'}{A}X - \frac{w_2'}{A}Z_f - \frac{w_3}{A}\Gamma_{EX} - \frac{w_4}{A}\Gamma_{MNE}, $$

(19)

or,

$$ q_{fj} = \theta_1 + \theta_2Q_f^{-j} + \theta_3q_d +\theta_4'X + \theta_5'Z_f + \theta_6\Gamma_{EX} + \theta_7\Gamma_{MNE}. $$

(20)

In Eq. 8 we add the random error term v to complete the econometric specification and account for unobserved variables. A similar method follows to linearize Eq. 5 and obtain Eq. 7.