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Do Domestic Firms Benefit from Foreign Presence and Import Competition in Irish Services Sectors?


  • This work makes use of data from the Central Statistics Office (CSO), which is CSO copyright. The possibility for controlled access to the confidential micro data set on the premises of the CSO is provided for in the Statistics Act 1993. The use of CSO data in this work does not imply the endorsement of the CSO in relation to the interpretation or analysis of the data. This work uses a research data set which may not exactly reproduce statistical aggregates published by the CSO. I thank Viacheslav Voronovich, Andrew Murray, Kieran Culhane and Jillian Delaney of the CSO for data provision and support. I am grateful for financial support for this research from the Irish Research Council for the Humanities and Social Sciences. I thank Seán Lyons, Wolfgang Keller, Gavin Murphy, Farid Toubal, seminar participants at the Economic and Social Research Institute, at the 2nd Conference of GIST ‘Trade and Investment in Services: Theory and Evidence’ in Ljubljana, at the IAW-MicroDyn Workshop ‘Global and local firm linkages: Micro-level evidence on the structure and dynamics of enterprise activity’ in Tübingen and at the Workshop ‘Multinational firms, trade and innovation’ at NUI Maynooth for helpful comments and suggestions. All remaining errors are my own.


This paper examines whether domestic firms benefit from the pro-competitive effects of imports from abroad and from the presence of foreign-owned firms in the host country in three Irish market-services sectors between 2001 and 2007. Grouping the three sectors together masks opposing effects in individual sectors. Where significant, the effect of foreign presence on domestic firms tends to be negative, this is mainly the case in wholesale and retail trade. Despite it being of lesser importance than foreign presence in these sectors, import competition from abroad is negatively associated with domestic firms' productivity in wholesale and retail trade, but positively in transport, storage and communication. There is no significant effect of foreign presence or import competition in real estate, rental and business activities. Using capital-labour ratios as an input-based indicator related to productivity suggests that domestic firms adapt to increased foreign competition by adjusting their inputs.

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