Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/177826 
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Title: 

Foreign investment regulation and firm productivity: Granular evidence from Indonesia

The document was removed on behalf of the author(s)/ the editor(s).

Year of Publication: 
2018
Series/Report no.: 
cege Discussion Papers No. 345
Publisher: 
University of Göttingen, Center for European, Governance and Economic Development Research (cege), Göttingen
Abstract: 
Based on a yearly census of Indonesian manufacturing firms for 2000-2014, we investigate the effects of a sector-specific investment policy reform on firm productivity. Hereby we exploit a protectionist foreign direct investment reform (the so-called negative investment list) that designated certain sectors at the five-digit level to become closed or only conditionally open to foreign investors. The list was first released in 2000 and has been repeatedly revised by the Indonesian authorities since. Our empirical analysis links the changes within this regulatory framework to variation in firm-level productivity in a large firm panel. Controlling for an extensive set of fixed effects as well as potential drivers of endogeneous regulation, we find robust evidence of declining foreign capital shares in sectors subject to restrictions on foreign direct investment, followed by a sizable decrease in firm productivity. From the different types of conditions, sector-wide FDI bans were linked to the largest productivity declines. We also document the presence of negative backward productivity spillovers of regulation that propagate throughout the value chain.
Subjects: 
FDI
regulation
Indonesia
total factor productivity
spillovers
JEL: 
F23
L51
D24
F21
L6
Document Type: 
Working Paper

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The document was removed on behalf of the author(s)/ the editor(s) on: June 4, 2019


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