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The impact on wages, employment and exports of backward linkages between multinational companies and SMEs

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Author: Leiva, Juan Carlos - Monge Rodríguez, Ricardo - Rodríguez-Alvarez, Juan Antonio UN symbol.: LC/PUB.2017/24-P p. 98-123; grafs., tabls December 2017


Policymakers often look for ways to attract foreign direct investment (FDI) by multinational corporations (MNCs). This paper estimates the impact of a programme, Costa Rica Provee, that seeks to increase backward linkages between small and medium-sized enterprises (SMEs) and MNCs in Costa Rica. The impacts were measured by reference to real average wages, employment demand and the probability of exporting, using a combination of fixed effects and propensity score matching with panel data on treated and untreated firms for 2001-2011. Programme beneficiaries evinced higher average wages, labour demand and export probabilities than untreated firms, with dose and duration also having a major influence.