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Price Competition in the enlarged EU 27 Export Market and the Role of Foreign Direct Investment

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  • Jens K. Perret

    (European Institute for International Economic Relations at the University of Wuppertal)

Abstract

From a microeconomic perspective competition between firms has been duely discussed. Extending microeconomic concepts to a macroeconomic level and considering competition between countries becomes more complex. The complexity issues is tackled in this study by extending a methodology developed in Borbely (2006) to account for specialization in specific sectors as well as price groups that under certain assumptions can be seen as a quality indicator. This study observes 27 EU countries - excluding Croatia - and Turkey. This allows for a view on the competition structure in the context of the EU common market. In a second step of the analysis it is analyzed whether FDI inflows impact the price - quality - level of a sector or the probability to switch to a higher or a lower price level in said sector. Where in other publications including \cite{borbely06} for selected EU countries a positive impact of FDI inflows is found, this study finds for the EU as a whole or the EU 15 or EU 10+1 (including Turkey) sub-groups no significant impact of FDI inflows on the price level or the probability to switch to another price level.

Suggested Citation

  • Jens K. Perret, 2014. "Price Competition in the enlarged EU 27 Export Market and the Role of Foreign Direct Investment," Schumpeter Discussion Papers SDP14011, Universitätsbibliothek Wuppertal, University Library.
  • Handle: RePEc:bwu:schdps:sdp14011
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    References listed on IDEAS

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    1. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821.
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    More about this item

    Keywords

    structural change; European Union; price competition; exports; revealed comparative advantages; export unit values;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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