IDEAS home Printed from https://ideas.repec.org/p/fce/doctra/0612.html
   My bibliography  Save this paper

Convergence and FDI in an enlarged EU: what can we learn from the experience of cohesion countries for the CEECS?

Author

Abstract

This paper emphasises that, for the less advanced European Union countries, FDI inflows are an important engine of convergence towards their more advanced counterparts. In general, CEECs and Cohesion countries hosting FDI tend to grow faster than those receiving few FDI. Not only the level but also the sectoral composition of FDI matters. Multinational corporations, by carrying out technically demanding production functions, have contributed to upgrade the production capacities of receiving CEECs and to increase the technological level of goods produced there. Competing on similar markets, but with higher wages and lower human capital endowments than CEECs, Portugal has lost its "comparative advantage" with the entry of CEECs as a possible destination of export-oriented FDI. This "diverting effect" explains a part of the disappointing performances of Portugal in terms of catching up. Thus, the relevant issue is no longer whether CEECs will follow an Irish or a Portuguese convergence scenario, but rather whether Portugal will converge or diverge towards CEECs.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Sandrine Levasseur, 2006. "Convergence and FDI in an enlarged EU: what can we learn from the experience of cohesion countries for the CEECS?," Documents de Travail de l'OFCE 2006-12, Observatoire Francais des Conjonctures Economiques (OFCE).
    • Handle: RePEc:fce:doctra:0612
    as

    Download full text from publisher

    File URL: http://www.ofce.sciences-po.fr/pdf/dtravail/WP2006-12.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gabor Hunya, 2002. "Recent Impacts of Foreign Direct Investment on Growth and Restructuring in Central European Transition Countries," wiiw Research Reports 284, The Vienna Institute for International Economic Studies, wiiw.
    2. Maria Abreu & Henri L. F. de Groot & Raymond J. G. M. Florax, 2005. "A Meta‐Analysis of β‐Convergence: the Legendary 2%," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 389-420, July.
    3. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-251, April.
      • Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence," Papers 645, Yale - Economic Growth Center.
      • Barro, Robert J. & Sala-i-Martin, Xavier, 1992. "Convergence," Scholarly Articles 3451299, Harvard University Department of Economics.
    4. Damijan, Joze P. & Knell, Mark & Majcen, Boris & Rojec, Matija, 2003. "The role of FDI, R&D accumulation and trade in transferring technology to transition countries: evidence from firm panel data for eight transition countries," Economic Systems, Elsevier, vol. 27(2), pages 189-204, June.
    5. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    6. William D. Nordhaus, 1972. "The Recent Productivity Slowdown," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 3(3), pages 493-546.
    7. Joze P. Damijan & Mark Knell & Boris Majcen & Matija Rojec, 2003. "Technology Transfer through FDI in Top-10 Transition Countries: How Important are Direct Effects, Horizontal and Vertical Spillovers?," William Davidson Institute Working Papers Series 549, William Davidson Institute at the University of Michigan.
    8. Wagner, Martin & Hlouskova, Jaroslava, 2001. "The CEEC10's Real Convergence Prospects," Transition Economics Series 20, Institute for Advanced Studies.
    9. Peter Havlik, 2003. "Restructuring of manufacturing industry in the central and east european countries," Prague Economic Papers, Prague University of Economics and Business, vol. 2003(1), pages 19-36.
    10. Sandrine Cazes & Alena Nesporova, 2004. "Labour markets in transition: balancing flexibility and security in Central and Eastern Europe," Revue de l'OFCE, Presses de Sciences-Po, vol. 91(5), pages 23-54.
    11. Blomström, Magnus & Kokko, Ari, 2003. "Human Capital and Inward FDI," EIJS Working Paper Series 167, Stockholm School of Economics, The European Institute of Japanese Studies.
    12. Selin Sayek & Laura Alfaro & Areendam Chanda & Sebnem Kalemli-Ozcan, 2003. "FDI Spillovers, Financial Markets, and Economic Development," IMF Working Papers 2003/186, International Monetary Fund.
    13. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
    14. Giuseppe Nicoletti & Stefano Scarpetta, 2003. "Regulation, productivity and growth: OECD evidence [‘A model of growth through creative destruction’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 18(36), pages 9-72.
    15. Stephan, Johannes, 2002. "Industrial Specialisation and Productivity Catch-Up in CEECs - Patterns and Prospects -," IWH Discussion Papers 166/2002, Halle Institute for Economic Research (IWH).
    16. Ben-David, Dan, 1994. "Convergence Clubs and Diverging Economies," CEPR Discussion Papers 922, C.E.P.R. Discussion Papers.
    17. Yuko Kinoshita, 2000. "R&D and technology spillovers via FDI: Innovation and absorptive capacity," CERGE-EI Working Papers wp163, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    18. Nuno Crespo & Maria Paula Fontoura & Frank Barry, 2004. "EU Enlargement and the Portuguese Economy," The World Economy, Wiley Blackwell, vol. 27(6), pages 781-802, June.
    19. Quah, D., 1990. "Galton'S Fallacy And The Tests Of The Convergence Hypothesis," Working papers 552, Massachusetts Institute of Technology (MIT), Department of Economics.
    20. Danny Quah, 1993. "Galton's Fallacy and Tests of the Convergence Hypothesis (Now published in Scandinavian Journal of Economics 95 (4), 1993, pp.427-443.)," STICERD - Econometrics Paper Series 265, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    21. Ekholm, Karolina & Braconier, Henrik, 2001. "Foreign Direct Investment in Central and Eastern Europe: Employment Effects in the EU," CEPR Discussion Papers 3052, C.E.P.R. Discussion Papers.
    22. Frank Berry, 2003. "Irish Economic Development over Three Decades of EU Membership," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 53(9-10), pages 394-412, September.
    23. Joze P. Damijan & Saso Polanec & Janez Prasnikar, 2004. "Self-selection, Export Market Heterogeneity and Productivity Improvements: Firm Level Evidence from Slovenia," LICOS Discussion Papers 14804, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    24. Dirk Pilat & Paul Schreyer, 2003. "Measuring productivity," OECD Economic Studies, OECD Publishing, vol. 2001(2), pages 127-170.
    25. Nazrul Islam, 2003. "What have We Learnt from the Convergence Debate?," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 309-362, July.
    26. Walid Hejazi & A Edward Safarian, 1999. "Trade, Foreign Direct Investment, and R&D Spillovers," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 30(3), pages 491-511, September.
    27. Yuko Kinoshita, 2000. "R&D and Technology Spillovers via FDI: Innovation and Absorptive Capacity," William Davidson Institute Working Papers Series 349, William Davidson Institute at the University of Michigan.
    28. Bernard, Andrew B & Jones, Charles I, 1996. "Comparing Apples to Oranges: Productivity Convergence and Measurement across Industries and Countries," American Economic Review, American Economic Association, vol. 86(5), pages 1216-1238, December.
    29. Peter Havlik, 2005. "Structural Change, Productivity and Employment in the New EU Member States," wiiw Research Reports 313, The Vienna Institute for International Economic Studies, wiiw.
    30. Moomaw, Ronald L. & Yang, Euy-Seok, 2004. "Total factor productivity and economic freedom implications for EU enlargement," ZEI Working Papers B 02-2004, University of Bonn, ZEI - Center for European Integration Studies.
    31. International Monetary Fund, 2005. "Slovak Republic: Selected Issues and Statistical Appendix," IMF Staff Country Reports 2005/072, International Monetary Fund.
    32. Nordhaus, William, 2007. "Alternative measures of output in global economic-environmental models: Purchasing power parity or market exchange rates?," Energy Economics, Elsevier, vol. 29(3), pages 349-372, May.
    33. Ingo Geishecker & Gabor Hunya, 2005. "Employment Effects of Foreign Direct Investment in Central and Eastern Europe," wiiw Research Reports 321, The Vienna Institute for International Economic Studies, wiiw.
    34. Quah, Danny, 1993. " Galton's Fallacy and Tests of the Convergence Hypothesis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 427-443, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sandrine Levasseur, 2011. "Production under foreign ownership and domestic volatility: an empirical investigation at the sector level," Working Papers hal-01069476, HAL.
    2. repec:spo:wpecon:info:hdl:2441/5l6uh8ogmqildh09h564gf28g is not listed on IDEAS
    3. repec:hal:wpspec:info:hdl:2441/5l6uh8ogmqildh09h564gf28g is not listed on IDEAS
    4. repec:hal:spmain:info:hdl:2441/5l6uh8ogmqildh09h564gf28g is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:hal:spmain:info:hdl:2441/3382 is not listed on IDEAS
    2. repec:spo:wpecon:info:hdl:2441/3382 is not listed on IDEAS
    3. repec:hal:wpspec:info:hdl:2441/3382 is not listed on IDEAS
    4. Eckey, Hans-Friedrich & Döring, Thomas & Türck, Matthias, 2006. "Convergence of regions from 23 EU member states," Volkswirtschaftliche Diskussionsbeiträge 86, University of Kassel, Faculty of Economics and Management.
    5. Bartlomiej Rokicki & Geoffrey J.D. Hewings, 2017. "The impact of the regional price deflators on regional income convergence in Poland," Bank i Kredyt, Narodowy Bank Polski, vol. 48(6), pages 531-556.
    6. Krasnopjorovs, Olegs, 2013. "Latvijas ekonomikas izaugsmi noteicošie faktori [Factors of Economic Growth in Latvia]," MPRA Paper 47550, University Library of Munich, Germany.
    7. Nicholas Vasilakos & Nikolay Zubanov, 2009. "Income Convergence and R&D Intensity in OECD Manufacturing Industries: A Panel Study," Discussion Papers 09-09, Department of Economics, University of Birmingham.
    8. Burak GÜRIŞ & İpek M. YURTTAGÜLER & Muhammed TIRAŞOĞLU, 2017. "Unemployment convergence analysis for Nordic countries: Evidence from linear and nonlinear unit root tests," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 45-56, Spring.
    9. Burak GÜRIŞ & İpek M. YURTTAGÜLER & Muhammed TIRAŞOĞLU, 2017. "Unemployment convergence analysis for Nordic countries: Evidence from linear and nonlinear unit root tests," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 45-56, Spring.
    10. William Brock & M. Taylor, 2010. "The Green Solow model," Journal of Economic Growth, Springer, vol. 15(2), pages 127-153, June.
    11. Licia Ferranna & Margherita Gerolimetto & Stefano Magrini, 2016. "The effect of immigration on convergence dynamics in the US," Working Papers 2016:27, Department of Economics, University of Venice "Ca' Foscari".
    12. Julie Le Gallo & Sandy Dall'erba, 2008. "Spatial and sectoral productivity convergence between European regions, 1975–2000," Papers in Regional Science, Wiley Blackwell, vol. 87(4), pages 505-525, November.
    13. Amélie Charles & Olivier Darne & Jean-François Hoarau, 2012. "Convergence of real per capita GDP within COMESA countries: A panel unit root evidence," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 49(1), pages 53-71, August.
    14. Ben-David, Dan, 1996. "Trade and convergence among countries," Journal of International Economics, Elsevier, vol. 40(3-4), pages 279-298, May.
    15. Quah, Danny, 1995. "Empirics for economic growth and convergence," LSE Research Online Documents on Economics 2136, London School of Economics and Political Science, LSE Library.
    16. Stephen Dobson & Carlyn Ramlogan & Eric Strobl, 2006. "Why Do Rates Of Β‐Convergence Differ? A Meta‐Regression Analysis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(2), pages 153-173, May.
    17. Muhammad Tariq Majeed & Amna Malik, 2016. "E-government, Economic Growth and Trade: A Simultaneous Equation Approach," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(4), pages 499-519.
    18. repec:kap:iaecre:v:17:y:2011:i:1:p:101-115 is not listed on IDEAS
    19. Grafström, Jonas, 2017. "An Econometric Analysis of Divergence of Renewable Energy Invention Efforts in Europe," Ratio Working Papers 295, The Ratio Institute.
    20. Peter Mulder & Henri Groot, 2007. "Sectoral Energy- and Labour-Productivity Convergence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 36(1), pages 85-112, January.
    21. Maria Sassi, 2011. "Convergence Across the EU Regions: Economic Composition and Structural Transformation," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 17(1), pages 101-115, February.
    22. Kounetas, Konstantinos Elias, 2018. "Energy consumption and CO2 emissions convergence in European Union member countries. A tonneau des Danaides?," Energy Economics, Elsevier, vol. 69(C), pages 111-127.
    23. Mendez-Guerra, Carlos, 2018. "Beta, Sigma and Distributional Convergence in Human Development? Evidence from the Metropolitan Regions of Bolivia," MPRA Paper 87627, University Library of Munich, Germany.
    24. Enrico Fabrizi & Gianni Guastella & Stefano Marta & Francesco Timpano, 2016. "Determinants of Intra-Distribution Dynamics in European Regions: An Empirical Assessment of the Role of Structural Intervention," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 107(5), pages 522-539, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fce:doctra:0612. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Francesco Saraceno (email available below). General contact details of provider: https://edirc.repec.org/data/ofcspfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.