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Evaluating investment projects in the presence of sectoral linkages

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  • Niko Matouschek
  • Anthony J. Venables

Abstract

In this paper we develop a framework to assess the economic impact of foreign investment projects. If investment projects interact with other industries in the host economy, either by buying inputs locally or by selling their own product to local downstream firms, they can create sectoral linkages. The expansion of upstream and downstream industries can feed back to the project's own industry leading to a further expansion of the local industry. We study the circumstances under which investment projects lead to the creation of sectoral linkages and characterize the factors that determine the project's welfare impact. We link analytical findings to case studies undertaken for the EBRD.

Suggested Citation

  • Niko Matouschek & Anthony J. Venables, 2005. "Evaluating investment projects in the presence of sectoral linkages," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(4), pages 573-603, October.
    • Handle: RePEc:bla:etrans:v:13:y:2005:i:4:p:573-603
    DOI: 10.1111/j.0967-0750.2005.00233.x
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    References listed on IDEAS

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    1. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert-Nicoud, 2005. "Economic Geography and Public Policy," Economics Books, Princeton University Press, edition 1, number 7524.
    2. Markusen, James R. & Venables, Anthony J., 1999. "Foreign direct investment as a catalyst for industrial development," European Economic Review, Elsevier, vol. 43(2), pages 335-356, February.
    3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
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    Cited by:

    1. Laura Resmini, 2003. "Economic integration and regional patterns of industry location in transition countries," ERSA conference papers ersa03p399, European Regional Science Association.
    2. Girma, Sourafel & Gong, Yundan, 2008. "Putting people first? Chinese state-owned enterprises' adjustment to globalisation," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 573-585, March.
    3. Matouschek, Niko, 1999. "Foreign Direct Investment and Spillovers through Backward Linkages," CEPR Discussion Papers 2283, C.E.P.R. Discussion Papers.
    4. Sergey M. Kadochnikov & Igor M. Drapkin, 2008. "Market Structure, Technological Gap and Vertical Linkage Effects from Foreign Direct Investment," CESifo Working Paper Series 2227, CESifo.

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