EFFECT OF FOREIGN PRESENCE ON DOMESTIC PERFORMANCE: THE CASES OF EDUCATION IN THE US AND MANUFACTURING FIRMS IN ETHIOPIA
Date of Award
Doctor of Philosophy
This dissertation studies the effects of foreign presence on the performance of domestic institutions and economic agents. We identify three types of foreign presence: international students, inward foreign investment, and exporting activities. The first chapter investigates the impacts of international students on the graduation performance of host universities and degree completions of native students. Using the Illinois Board of Higher Education (1996 - 2010) and California Postsecondary Education Commission (1982 - 2009) data on enrollment and graduation -- disaggregated by universities, programs, and types of students -- we follow a two-stage method to achieve our goal. In the first stage, we estimate university `premiums' on graduations, separately for master's and PhD degrees, and then in the second stage we examine how these premiums are affected by the graduation rates of international students. We allow for possible two-way causality in the second stage. The results reveal that, on average, one percentage point increase in the share of international master's degree and PhD recipients in the universities across Illinois increases master's and PhD graduation premiums by about 1 and 0.5 additional graduates, respectively. In California, one percentage point increase in the share of foreign degree recipients increases the master's graduation premiums by more than 0.3 graduates. Our estimates also suggest that international students generate positive externalities on the university graduation premiums among the native students. In the second chapter, we use proportional hazards and multinomial logit models to evaluate the role of spillovers from exporting and foreign-owned firms on the export market entry and exit of local firms. Our analysis is based on the firm-level Ethiopian manufacturing survey data for the period 1996 - 2010. The results show that the backward and forward spillovers from foreign-owned exporting firms improve the probability of domestic firms to start exporting. Besides, the foreign-owned firms serving domestic markets generate horizontal spillovers that increase the export survival rates of local firms. On the other hand, the presence of domestic exporting firms increases the exporting probability of local firms in upstream sectors and export survival rates in upstream and downstream sectors. Lastly, the third chapter examines the efficiency effects of spillovers on the local manufacturing enterprises in Ethiopia using two-stage estimations. First, we estimate technical efficiency of firms using the `true' fixed-effects stochastic frontier analysis. Afterwards, we adopt system GMM to examine how spillovers impact the performance of domestic firms. The results show that the presence of domestic exporting firms in the same sector increases the efficiency of local non-exporting firms with a higher absorptive capacity. As to foreign-owned firms, those serving local markets produce positive backward and forward spillovers improving the efficiency of local exporting firms while negatively impacting the non-exporting enterprises. Likewise, spillovers from foreign-owned exporting firms increase the efficiency of domestic exporting firms in upstream sectors at the expense of the non-exporters.
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