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Vito Amendolagine, Mr. Andrea F Presbitero, Roberta Rabellotti, Marco Sanfilippo, and Adnan Seric
The local sourcing of intermediate products is one the main channels for foreign direct investment (FDI) spillovers. This paper investigates whether and how participation and positioning in the global value chains (GVCs) of host countries is associated to local sourcing by foreign investors. Matching two firm-level data sets of 19 Sub-Saharan African countries and Vietnam to country-sector level measures of GVC involvement, we find that more intense GVC participation and upstream specialization are associated to a higher share of inputs sourced locally by foreign investors. These effects are larger in countries with stronger rule of law and better education.
Ms. Isabelle Mejean, Thierry Mayer, and Benjamin Nefussi
Economists interested in location choices usually focus their attention on investments abroad. This neglects the fact that multinational enterprises continue to invest domestically while undertaking foreign expansion. This paper compares investments at home and abroad. Our firm-level dataset shows an important home bias in productive investments. Part of this "excessive" domestic investment is explained by standard determinants of location choices. The interdependence between affiliates of the same industrial group however accounts for the lion's share of the home bias. Moreover, French firms' propensity to invest abroad is positively related to their productivity and the size of their intangible assets.
Ms. Isabelle Mejean, Thierry Mayer, and Benjamin Nefussi

Economists interested in location choices usually focus their attention on investments abroad. This neglects the fact that multinational enterprises continue to invest domestically while undertaking foreign expansion. This paper compares investments at home and abroad. Our firm-level dataset shows an important home bias in productive investments. Part of this "excessive" domestic investment is explained by standard determinants of location choices. The interdependence between affiliates of the same industrial group however accounts for the lion's share of the home bias. Moreover, French firms' propensity to invest abroad is positively related to their productivity and the size of their intangible assets.

Zaijin Zhan

, which are critical for many production lines, whereas only 10 percent of fast job creators do the same. The median premium for working on weekends is 15 percent for fast job creators, but 100 percent for slow job creators. Fast job creators have a higher severance package. This is consistent with Bentolila-Bertola’s view (1990) that firing costs have a larger marginal impact on firmspropensity to fire than to hire. The share of public sector employment is similar between slow and fast job creators, suggesting that most job creation is in the private sector

International Monetary Fund. European Dept.

finds some evidence that competition in the services sector affects manufacturing firmspropensity to exports: the effect of aggregate competition in services on export propensity is not statistically significant but the impact of competition in network services is significant. This is consistent with his finding that the spillover effect of services deregulation on productivity is larger for network services than for other services. D. Conclusion 32. In the past, France often deregulated its services sector as part of a European-wide initiative . France

International Monetary Fund

negative effects) Factors Cameroon Côte d’lvoire Nigeria Senegal Variables relating to human capital Skilled labour availability + + + Investment in health and education + Firms’ capacity to innovate + + Firmspropensity to train workers + + Variables relating to openness Export performance + + + Import tariffs - - Variables relating to infrastructure Availability of general infrastructure

Ms. Gabriela Inchauste, Mr. Mark Gradstein, and Ms. Era Dabla-Norris
In many developing countries, a significant part of economic activity takes place in the informal sector. Earlier work has examined the determinants of the size of the informal sector, focusing separately on factors such as tax and regulation burden, financial market development, and the quality of the legal system. We revisit this issue by using an integrated dataset which contains rich information on all these aspects. Testing the channels affecting the degree of informality, we find evidence that all previously identified factors indeed play a role in driving informality. In particular, and consistent with the suggested theoretical model, we find support for the significance of the quality of the legal system.
Ms. Gabriela Inchauste, Mr. Mark Gradstein, and Ms. Era Dabla-Norris

size of the informal sector. Moreover, as a * is decreasing in p , whereas a − increases in p , it follows that the quality of the legal system reduces the size of the informal sector. We can then conduct comparative statics analysis summarized as follows: Proposition 3. A higher regulatory burden and a weaker legal enforcement give rise to a larger informal sector. Stronger legal enforcement also implies higher workers’ wage rate. 12 While higher cost of regulation increases firmspropensity to go informal, the elasticity of this relationship turns

Mr. Marcello M. Estevão

change the flavor of the estimates reported here. 21 Estimates of the tax-wedge and replacement rate effects are more statistically significant in the second half of the sample. 22 Bertola and Bentolila (1990) show the importance of both effects with a model of firms’ optimal employment policies under linear adjustment costs. They find that firing costs have a larger effect on firmspropensity to fire, than to hire and (slightly) increase average long-run employment, a result consistent with estimates for the second half of our sample. 23 The

Vito Amendolagine, Mr. Andrea F Presbitero, Roberta Rabellotti, Marco Sanfilippo, and Adnan Seric

the main reason to invest is market-seeking and zero for any other reason ( MARTKET SEEKING ). Definition, sources, and summary statistics of all the variables are presented in Appendix Table A2 . We include fixed effects for the origin and destination countries of the foreign investor i (δ x and λ n , respectively) and for the destination industry j (γ j ), to absorb unobserved heterogeneity which could affect both the degree of GVC participation and the firm propensity to undertake local sourcing. Standard errors are clustered at the destination country