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Foreign Direct Investment and Enterprise Restructuring in Central Europe

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  • Ray Barrell
  • Dawn Holland

Abstract

Foreign direct investment is at the forefront of economic policy decisions in Central Europe, as it is expected to accelerate enterprise restructuring and aid in the successful transition to a market economy. This paper contains a panel data study of the effects of FDI in 11 different manufacturing sectors within three Central European economies: Hungary, Poland and the Czech Republic. We find evidence that FDI has increased labour productivity levels in most manufacturing sectors. We are able to differentiate between sectors with a high elasticity of substitution between labour and capital and those that are inelastic. We have also presented evidence to support the theory that the impact on labour productivity is predominantly due to the intangible assets introduced by foreign firms, rather than simply the fixed capital investment associated with FDI.

Suggested Citation

  • Ray Barrell & Dawn Holland, 2000. "Foreign Direct Investment and Enterprise Restructuring in Central Europe," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 477-504, July.
  • Handle: RePEc:bla:etrans:v:8:y:2000:i:2:p:477-504
    DOI: 10.1111/1468-0351.00052
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    File URL: https://doi.org/10.1111/1468-0351.00052
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