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The role of foreign direct investment and labor productivity in explaining croatian regional export dynamics

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  • Saša Jakšić

    (University of Zagreb)

  • Nataša Erjavec

    (University of Zagreb)

  • Boris Cota

    (University of Zagreb)

Abstract

The potential benefits of trade openness and export led growth strategy are well documented in the empirical literature. As previous researches found evidence that international trade does not support convergence in GDP per capita of Croatian regions towards average EU GDP per capita, this paper investigates the role of foreign direct investments (FDI) and labour productivity in describing Croatian regional export dynamics for the period from 2004 to 2015. The results of the estimated panel models confirm the importance of strengthening manufacturing as well as strong comovements of exports and imports as a consequence of the internalization of product chains. Furthermore, the obtained results indicate that the main obstacles towards strengthening of the Croatian regional exports are the lack of domestic demand effect and decreasing labour productivity. Moreover, as FDI inflows are mostly directed towards service sector it is not surprising that the overall impact of FDI inflows on exports is negative. Although one of the declared goals of Croatian policy makers is attracting FDI into export industries, the effects and, first of all, proper policy measures are yet to be seen.

Suggested Citation

  • Saša Jakšić & Nataša Erjavec & Boris Cota, 2019. "The role of foreign direct investment and labor productivity in explaining croatian regional export dynamics," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 27(3), pages 835-849, September.
    • Handle: RePEc:spr:cejnor:v:27:y:2019:i:3:d:10.1007_s10100-018-0583-2
    DOI: 10.1007/s10100-018-0583-2
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