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OECD Economic Survey of Costa Rica: Research Findings on Productivity

image of OECD Economic Survey of Costa Rica: Research Findings on Productivity

This volume collects four studies that were prepared as background research to the 2018 OECD Economic Survey of Costa Rica. Using firm-level, trade and sectorial data, these studies seek to provide insights into the trends in productivity and its determinants in Costa Rica. This volume represents a collaborative effort by a team of researchers from the OECD Secretariat and official agencies of Costa Rica.

 

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FDI spillovers in Costa Rica: boosting local productivity through backward linkages

This chapter analyses productivity spillovers from FDI to local firms in Costa Rica, by building up on two different approaches, as done in Ruane and Uǧur (2005[1]) and Haller (2014[2]). We use panel data with fixed effects and propensity score matching to exploit information at the firm level, comprised in a dataset covering the universe of formal firms in Costa Rica between 2008 and 2015. The analysis found robust evidence that the presence of foreign firms is positively correlated with the productivity of local Costa Rican firms in both the manufacturing and the services sectors. In the manufacturing sector, the local supplying firms have, on average, 8% higher labour productivity than those that do not have business relations with foreign-owned firms. In the services sector, local firms that are suppliers of foreign-owned firms have, on average, 6.4% higher labour productivity than those that do not have business relations with foreign-owned firms. These findings highlight the importance of FDI attraction for the Costa Rican economy as a whole and the need to deepen public policy aimed at boosting the creation of linkages between foreign-owned and local firms.

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