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The Eu Eastern Enlargement And Fdi: The Implications From A Neoclassical Growth Model

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Author Info

  • Lilia Maliar

    ()
    (Universidad de Alicante)

  • Kateryna Garmel

    (National University "Kyiv-Mohyla Academy")

  • Serguei Maliar

    (Universidad de Alicante)

Abstract

This paper studies how the EU Eastern enlargement can affect the economies of the old and the new EU members and the non-acceded countries in the context of a multi-country neoclassical growth model where Foreign Direct Investment (FDI) is subject to border costs. We assume that in the moment of the EU enlargement border costs are eliminated between the old and the new EU member states but they remain unchanged between the old EU member states and the nonacceded countries. In a calibrated version of the model, the short-run effects of the EU enlargement proved to be relatively small for all the economies considered. The long-run effects are however significant: in the acceded countries, investors from the old EU member states become permanent owners of about 3/4 of capital, while in the nonacceded countries, they are forced out of business by local producers.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2005-29.pdf
File Function: Fisrt version / Primera version, 2005
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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2005-29.

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Length: 38 pages
Date of creation: Nov 2005
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2005-29

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Keywords: Foreign direct investment; EU enlargement; Neoclassical growth model; Transition economies; Three-country model;

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References

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  1. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 92(3), pages 451-71, June.
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  3. Karolina Ekholm & Rikard Forslid & James Markusen, 2003. "Export-Platform Foreign Direct Investment," NBER Working Papers 9517, National Bureau of Economic Research, Inc.
  4. Lilia Maliar & Serguei Maliar, 2003. "The Neoclassical Growth Model With Heterogenous Quasi-Geometric Consumers," Working Papers. Serie AD 2003-25, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  5. Robert Kollmann, 2004. "Welfare effects of a monetary union: the role of trade openness," ULB Institutional Repository 2013/7626, ULB -- Universite Libre de Bruxelles.
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  9. repec:rus:hseeco:122512 is not listed on IDEAS
  10. Richard E. Baldwin & Joseph F. Francois & Richard Portes, 1997. "The costs and benefits of eastern enlargement: the impact on the EU and central Europe," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 12(24), pages 125-176, 04.
  11. Claudia M. Buch & Robert M. Kokta & Daniel Piazolo, 2001. "Does the East Get What Would Otherwise Flow to the South? FDI Diversion in Europe," Kiel Working Papers 1061, Kiel Institute for the World Economy.
  12. Gorg, Holger & Strobl, Eric, 2001. "Multinational Companies and Productivity Spillovers: A Meta-analysis," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 111(475), pages F723-39, November.
  13. Joel I. Deichmann & Abdolreza Eshghi & Dominique M. Haughton & Selin Ayek & Nicholas C. Teebagy, 2003. "Foreign Direct Investment in the Eurasian Transition States," Eastern European Economics, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 41(1), pages 5-34, January.
  14. Lilia Maliar & Serguei Maliar, 2005. "Parameterized Expectations Algorithm: How to Solve for Labor Easily," Computational Economics, Society for Computational Economics, vol. 25(3), pages 269-274, June.
  15. Lucas, Robert E. B., 1993. "On the determinants of direct foreign investment: Evidence from East and Southeast Asia," World Development, Elsevier, vol. 21(3), pages 391-406, March.
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  18. Frank Smets & Raf Wouters, 2002. "An estimated dynamic stochastic general equilibrium model of the euro area," Working Paper Research, National Bank of Belgium 35, National Bank of Belgium.
  19. Biswas, Romita, 2002. "Determinants of Foreign Direct Investment," Review of Development Economics, Wiley Blackwell, vol. 6(3), pages 492-504, October.
  20. Lilia Maliar & Serguei Maliar, 1999. "- Heterogeneity In Capital And Skills In A Neoclassical Stochastic Growth Model," Working Papers. Serie AD 1999-21, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  21. Lilia Maliar & Serguei Maliar, 2002. "The Representative Consumer In The Neoclassical Growth Model With Idiosyncratic Shocks," Working Papers. Serie AD 2002-20, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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Cited by:
  1. Garmel, Kateryna & Maliar, Lilia & Maliar, Serguei, 2008. "EU eastern enlargement and foreign investment: Implications from a neoclassical growth model," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 307-325, June.

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