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Beyond EU-US Trade Dynamics: TTIP Effects Related to Foreign Direct Investment and Innovation

Author

Listed:
  • Andre Jungmittag

    (Economics and Quantitative Methods at the Frankfurt University of Applied Sciences)

  • Paul J.J. Welfens

    (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))

Abstract

The international economic debate on the Transatlantic Trade and Investment Partnership (TTIP) has focused mainly on trade induced real income gains while the FDI related and innovation induced benefits have been largely neglected, although the EU and the US are leading FDI host countries and FDI source countries. Moreover, from a theoretical perspective a knowledge production function has to be considered in order to analyze FDI and innovation dynamics - and this can then be linked to output and economic growth, respectively. The panel data estimation of knowledge production functions for 20 EU countries between 2002-2012 shows clear empirical evidence that a rise of the FDI stock-GDP ratio will raise patent applications. Additionally, a higher per capita income - that could reflect trade related real income gains in the context of TTIP - also contributes to more patent applications. Time series data analysis for Germany indicates additionally that FDI induced higher innovation dynamics will raise output. Combining trade benefits and FDI/innovation related real income gains plus transatlantic macroeconomic interdependency effects a real income gain of nearly 2% should be expected for both Germany and the EU as a whole: considerably higher than what the official TTIP report for the European Commission has suggested. The approach developed has broad implications for deep regional integration (TPP, TTIP).

Suggested Citation

  • Andre Jungmittag & Paul J.J. Welfens, 2016. "Beyond EU-US Trade Dynamics: TTIP Effects Related to Foreign Direct Investment and Innovation," EIIW Discussion paper disbei212, Universitätsbibliothek Wuppertal, University Library.
  • Handle: RePEc:bwu:eiiwdp:disbei212
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    References listed on IDEAS

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    Cited by:

    1. Kaan Celebi, 2021. "Quo Vadis, Britain? – Implications of the Brexit process on the UK’s real economy," International Economics and Economic Policy, Springer, vol. 18(2), pages 267-307, May.
    2. P. J. J. Welfens, 2016. "Cameron’s information disaster in the referendum of 2016: an exit from Brexit?," International Economics and Economic Policy, Springer, vol. 13(4), pages 539-548, October.
    3. Paul J.J. Welfens & Tian Xiong, 2018. "The Effects of Foreign Direct Investment on Regional Innovation Capacity in China," EIIW Discussion paper disbei247, Universitätsbibliothek Wuppertal, University Library.
    4. Paul J. J. Welfens, 2019. "New Marshall-Lerner conditions for an economy with outward and two-way foreign direct investment," International Economics and Economic Policy, Springer, vol. 16(4), pages 593-617, October.
    5. Paul J. J. Welfens, 2020. "Trump’s Trade Policy, BREXIT, Corona Dynamics, EU Crisis and Declining Multilateralism," International Economics and Economic Policy, Springer, vol. 17(3), pages 563-634, July.
    6. Fabian J. Baier & Paul J. J. Welfens, 2019. "The UK’s banking FDI flows and Total British FDI: a dynamic BREXIT analysis," International Economics and Economic Policy, Springer, vol. 16(1), pages 193-213, March.
    7. Yue Liu & Siming Liu & Xueying Xu & Pierre Failler, 2020. "Does Energy Price Induce China’s Green Energy Innovation?," Energies, MDPI, vol. 13(15), pages 1-18, August.
    8. Paul J. J. Welfens & Fabian J. Baier, 2018. "BREXIT and Foreign Direct Investment: Key Issues and New Empirical Findings," IJFS, MDPI, vol. 6(2), pages 1-21, April.
    9. Paul J.J. Welfens, 2017. "The True Cost of BREXIT for the UK: A Research Note," EIIW Discussion paper disbei234, Universitätsbibliothek Wuppertal, University Library.

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    More about this item

    Keywords

    Knowledge production function; Innovation; FDI; TTIP; Empirical Analysis; EU;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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