Impact of aggregation on measuring FDI spillovers: a Monte Carlo appraisal

Using a Monte Carlo experiment, this paper explores the impact of data aggregation on measuring the FDI spillovers. We find the aggregation significantly covers up the spillovers, which is further exacerbated by the correlation between the foreign presence and the explanatory variable at the disaggregate level. However, if the FDI at the level of aggregation is proportional to its domestic counterparts, then the aggregation does not affect the measurement of spillovers.