Performing Department
Agric and Resource Economics
Non Technical Summary
This project aims at measuring the impact of foreign direct investment on agriculture in the United States. These investment activities are vital for the agricultural and food industry as they ensure economic growth and prosperity, create highly-compensated jobs, spur innovation, and drive international trade. However, so far, we know little about the impact of these investment activities on firm performance and spillover effects on domestic firms. Therefore, this project will develop a framework to precisely measure the impact of foreign direct investment on firms operating in the agricultural and food industry. We will accomplish this task by compiling a novel dataset on investment activities and linking this data to detailed productivity and efficiency measures collected at the firm level. By exploiting changes in investment activities over time and across industries, we disentangle the effect of foreign ownership on firm performance. The analysis will enable us to not only measure the impact on foreign subsidiaries but also to investigate spillover effects on domestic firms. Therefore, our project will enhance the understanding of a highly relevant policy issue that has been so far largely neglected in the empirical literature on foreign trade and investment while being of vital importance for the future of agriculture in the United States. Such understanding provides the foundation for fact-based public discussions and allows for informed decisions. Consequently, this project enhances market efficiency and performance by providing essential knowledge on the functioning of markets in light of changing trade and investment environments.
Animal Health Component
0%
Research Effort Categories
Basic
100%
Applied
(N/A)
Developmental
(N/A)
Goals / Objectives
The long-term goal of this project is to precisely measure the impact of foreign direct investment on agriculture in the United States. We accomplish this task by developing a novel dataset on foreign investment activities and linking it to detailed productivity and efficiency measures at the firm-level. By comparing firms with and without foreign ownership, we disentangle the impact of foreign investment activities on labor and capital productivity and evaluate the associated consequences for production efficiency. This analysis allows us to obtain a precise identification of the economic implications of foreign ownership and measure the impact of spatial and product-space spillover effects on domestic firms. Consequently, this project will provide essential knowledge on the functioning of markets in light of changing trade and investment environments and, thereby, enhance market efficiency and performance.
Project Methods
This research advances the understanding of the consequences of foreign direct investment in the agricultural and food industry of the United States. We achieve this goal by developing a novel dataset and using innovative analytical methods to precisely measure the impact of foreign ownership on firm performance and evaluate spillover effects on domestic firms. Until now, most studies that investigate these effects rely on inconsistent data sources to construct their primary dataset for causal inference. The use of this data results in biased estimates and limits the researchers ability to detect causal relationships. To account for this issue, we will circumvent the inconsistent public data sources and collect primary data on foreign direct investment and firm performance from privately-owned data sources. We will create a comprehensive dataset that will allow us to measure productivity and efficiency at the firm level. We will use these performance measures to investigate the impact of foreign ownership on agriculture and measure spillover effects on domestic firms. Because our empirical approach relies on variation in foreign investment activities and firm performance over time and across industries, the research design allows us to obtain causal inference of the relationship relying on difference-in-difference estimation techniques. Our research project will also enhance our knowledge of a highly relevant policy issue that has been so far largely neglected in the empirical literature while being of vital importance for the future of agriculture in the United States. The causal inference of this relationship is critical because such knowledge provides the foundation for a public discussion that is based on facts and allows for informed decisions. Because a considerable share of the domestic supply chain is in foreign hands, these companies play an essential role in the satisfaction of the food and fiber needs. Therefore, disputes over foreign investment activities have the potential to strongly impact the economic viability of agriculture in the United States. This issue becomes increasingly important in light of recent trade and investment disputes with foreign partners such as Canada, China, and the European Union. Therefore, it is also necessary to mention that foreign direct investment can have a considerable impact on the decision of foreign firms to allocate resources and entail substantial consequences for the well-being of farmers and food producers as well as our society as a whole.