Specialization and growth patterns in border regions of accession countries

This paper aims at exploring and analysing on a comparative basis the impact of the East enlargement of the EU on border regions in Bulgaria, Estonia, Hungary, Romania and Slovenia. In order to achieve the overall objective, the paper will first provide a definition and identification of border regions in the candidate countries and, then, a descriptive analysis of their relative position within each country and with respect to the EU-15 average. Thirdly, it will develop an econometric model able to analyse the determinants of regional specialization and growth in different type of regions (internal vs border; western versus eastern border regions, etc.). The results will be used to understand which are the winning and loosing regions in this process, in terms of regional growth prospects. This classification will be used to evaluate the likely distributional implications of enlargement for the accession countries under considerations. The overall empirical results, though limited in some counts, may serve as a reminder of border regions’ challenges. They allow to identify present patterns and trends, and represent a good baseline to make inference on what changes border regions in candidate countries might expect the integration process to bring. --economic integration,border regions,industry location,transition countries

Theoretical and Methodological Study on Comparative Advantages in Dynamic Growth Regions, Convergence and Inequalities Patterns

DYNREG

European integration and adjustment in border regions in accession countries

Border regions in accession countries are not the exception but the rule, since they cover almost 66% of the land and account for 58% of total population. The fall of the Berlin wall has put borders in a state of flux, with changes occurring in the physical location and perhaps their economic significance as well: the "core" markets moved from East to West, raising new challenges and opportunities for development for western border regions, and serious concerns for regions located along the Eastern border, potentially more sensitive to the collapse of the CMEA and the former Soviet Union. This paper aims at exploring and analysing on a comparative basis the impact of the East enlargement of the EU on border regions in Bulgaria, Estonia, Hungary, Romania and Slovenia. These five countries have different development levels and geographical co-ordinates that make their comparative analysis interesting. Hungary and Slovenia are relatively more advanced than Estonia, Bulgaria and Romania. In addition, Estonia is a North European country sharing its border with Finland, while Hungary is a Central European country showing common border with Austria. Slovenia and Bulgaria are Southern European countries bordering, respectively, with Italy and Austria, and Greece. Romania does not share any border with the EU-15. As a result, Hungary and Slovenia seem have the advantage of geographical proximity to Western European core countries, while the others do not. In order to achieve the overall objective, the paper will first provide a definition and identification of border regions in the candidate countries. Every state border and border region, in fact, is unique: its meaning and significance may change dramatically through space and time. Secondly, it will provide a descriptive analysis of their relative position within each country and with respect to the EU-15 average. Thirdly, it will develop an econometric model able to analyse the determinants of regional specialisation in different type of regions (internal vs border; western versus eastern border regions, etc.). In particular, the work will explore how the ongoing process of economic integration with the EU is affecting regional specialisation and which are the winning and loosing regions in this process, in terms of regional growth prospects. This classification will be used to evaluate the likely distributional implications of enlargement for the accession countries under considerations. The overall empirical results, though limited in some counts, may serve as a reminder of border regions' challenges. They allow to identify present patterns and trends, and represent a good baseline to make inference on what changes border regions in candidate countries might expect the integration process to bring.

Economic integration and regional patterns of industry location in transition countries

Recent developments in international trade theory predict that increased globalization will be associated with increase locational concentration of particular economic activities, and hence increased specialisation of national and regional economies. Relative little empirical evidence exists on whether these predictions are correct, mainly as far as Central and Eastern Europe is concerned. This paper aims at exploring and analysing the trade-location relationship in five candidate countries, namely Bulgaria, Estonia, Hungary, Romania and Slovenia, during the 1990s. Three empirical evidence will be provided: current trend in spatial development in the face of rapidly increasing trade at national and regional level; factors explaining such patterns and the role played by the economic integration process with the EU in partially or totally shaping such patterns. This paper combines spatial data on GDP, labour force, wages, and other socio-economic indicators included in REGSPEC database to estimate patterns of development at regional level. Particular emphasis will be devoted to understand these patterns in border regions, which may be disproportionately vulnerable to the enlargement process but also have the potential to exploit geographical proximity to their advantage. Several types of border regions can be identified in transition countries. Two groups of them seem to be worth analysing: internal border regions, i.e. those locating along the border with a present or candidate member to the EU, and external border regions, i.e. regions located at the borders of the "enlarged EU".

The Impact of Foreign Direct Investment to China on Foreign Direct Investment to Other Countries. ESRI Research Bulletin 2012/4/3

China has recently become a leading destination for foreign direct investment (FDI). The surge of FDI to China has followed its opening to the world economy and selective easing of capital controls. While the main motivation driving the increased inflows of foreign investment to China has been the availability of a large pool of low-cost labour, in recent years there has been a shift of inward FDI in China towards high-tech industries and services

Multinational Corporations as Catalyst for Industrial Development: The Case of Poland

In a recent model Markusen and Venables (1999) describe the conditions under which foreign direct investments (FDI) can act as a catalyst for local industrial development. We apply this framework to the case of Poland, allowing for the entry of multinationals in both intermediates and consumption goods industry. We check these assumptions against empirical evidence, exploring agglomeration patterns of multinational and domestic firms at the regional level, and constructing an econometric model able to measure the interactions between the two classes of firms. We find evidence going in the direction of both direct spill-overs and backward and forward linkages between domestic and multinational firms.http://deepblue.lib.umich.edu/bitstream/2027.42/39752/3/wp368.pd

Productivity Spillovers from Foreign Investment: The Role of Neglected Conditionalities

offered significant incentives in order to attract foreign direct investments (FDI), being motivated to do so by expectations of possible spillover benefits. Using an unbalanced panel of firm level data in Bulgaria, Poland and Romania over the 1995-2003 period, we examine the impact of foreign firms on domestic firms’ productivity. In particular, we try to answer the following research questions: 1) Are there any spillover effects of FDI, and if so, are they positive or negative? 2) Are spillover effects more likely to occur within or across sectors? 3) Are the existence, the direction and the magnitude of spillovers conditioned by region, sector and firm-specific characteristics? Our findings show that FDI spillovers do exist both within and across complementary manufacturing sectors, and that inter-sectoral spillovers dominate intra sectoral effects. More interestingly, we find that geography, technological content of foreign firms’ production, and domestic firm size are all factors able to condition the exploitation of productivity spillovers. Although these results should be interpreted with caution, they provide a good starting point for further research in this area.DYNREG, foreign direct investment, transition countries, spillovers

Multinational Corporations as Catalyst for Industrial Development: The Case of Poland

In a recent model Markusen and Venables (1999) describe the conditions under which foreign direct investments (FDI) can act as a catalyst for local industrial development. We apply this framework to the case of Poland, allowing for the entry of multinationals in both intermediates and consumption goods industry. We check these assumptions against empirical evidence, exploring agglomeration patterns of multinational and domestic firms at the regional level, and constructing an econometric model able to measure the interactions between the two classes of firms. We find evidence going in the direction of both direct spill-overs and backward and forward linkages between domestic and multinational firms.economic geography, FDI, transition economies

FDI in the Mediterranean Region: a Comparison with CEE Experience

The research paper was designed to identify the factors that would explain the patterns and the determinants of FDI in the Mediterranean region during 1990-1997. The most important fact characterising this period has been the extension of the Association Agreements to most of the countries belonging to the region. It was thought that these agreements would have given a new boost to foreign direct investments into the region, penalised by the emerging of the countries of Central and Eastern Europe as preferential partners of the EU. According to the empirical analyses, natural resource endowment still represents an important factor of attraction of FDI, relative to Central and Eastern Europe. Moreover, foreign investors have been attracted in the MED region by market considerations, concerning not only the single national markets, but also the regional one. This effect is stronger than in Central and Eastern Europe, suggesting that a deeper regional integration may sound attractive to foreign enterprises, mainly if the parent firm is located in the United States. Trade with major investors countries also matters, even though the derived effect appears somewhat smaller than found in Central Europe. This implies that an improvement in trade relationships with the EU – as envisaged by the Association Agreements – would have a positive impact on FDI patterns.Foreign Direct Investments, Association Agreements, Mediterranean, Central and Eastern Europe

The Impact of Mnes on Domestic Firms in CEECS: A Micro-Econometric Approach

Many governments in Central and Eastern European Countries (CEECs) have offered significant incentives in order to attract foreign investments, motivated by expectations on possible spillover benefits. FDI is usually perceived as a vehicle for transferring technology not only across national boundaries but also between firms, i.e. between foreign and domestic firms. When a foreign firm enters a new market, it generates different reactions from domestic firms. Additional competition pushes for efficiency improvements, which become necessary if firms want to keep their market shares. Domestic firms may learn from foreign companies about new products, production techniques and organization skills, thus increasing their performance. This transfer of benefits may occur either voluntarily, through input output linkages between domestic and foreign firms, or involuntarily through competition, imitation and training. The final result, however, is the same: domestic firms become more productive and efficient, thus fostering local industrial development, as suggested by several economists, from Hirschman (1954) to Markusen and Venables (1999). Despite this long theoretical tradition, there is little conclusive evidence supporting this claim. This paper focuses on the role played by multinational enterprises in fostering the economic development of the hosting regions in Central and Eastern European Countries (CEECs) by testing whether and to what extent technology transfer between domestic and foreign firms does occur. We distinguish not only between horizontal and vertical effects, but also, within the latter, between contacts between domestic suppliers of intermediate inputs and their multinational customers, and contacts between foreign suppliers of intermediates inputs to their domestic clients. The analysis is based on an unbalance panel of about 30,000 domestic firms and about 7,000 foreign firms operating in the manufacturing sector in Bulgaria, Czech R., Hungary, Poland and Romania. The years covered are 1993 through 2002. From a methodological point of view, we adopt the semiparametric estimation method suggested by Olley and Pakes (1996) to account for endogeneity of input demand, and test for the presence of several specific effects, such as country, region, time and sector effects.