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Regional Distribution and Spatial Impact of FDI in Greece: evidence from firm-level data

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  • Vassilis Monastiriotis
  • Jacob A. Jordaan

Abstract

Studies on the productivity spillovers of FDI have concentrated on the national-sectoral level. As a result, little is known about the impact of FDI on absolute and relative regional economic performance. In this paper we examine this issue by relying on a unique dataset of over 20,000 Greek firms for the period 2002-2006 covering all sectors of economic activity. We examine the spatial distribution of foreign-owned firms in the country and analyse the effect that their presence –at the local, regional and national levels– has on the productivity of domestic firms. We find strong evidence suggesting that foreign-owned firms self-select into regions and sectors of high productivity. Net of this selection effect, the impact of foreign presence on domestic productivity is negative –although at the very local level some positive spillover effects are identifiable. The bulk of the effects concentrate in non-manufacturing activities, high-tech sectors, and medium-sized high-productivity firms. Importantly, this effect is not constant across space however. Productivity spillovers tend to be more negative in the regions hosting the main urban areas in the country while they are more positive in smaller and more peripheral regions. In this way, despite the tendency of FDI to concentrate in a few only areas within the country –those of the highest level of development– the externalities that FDI activity generates to the local economies appear to be of a rather equilibrating character.

Suggested Citation

  • Vassilis Monastiriotis & Jacob A. Jordaan, 2011. "Regional Distribution and Spatial Impact of FDI in Greece: evidence from firm-level data," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 44, Hellenic Observatory, LSE.
  • Handle: RePEc:hel:greese:44
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    Cited by:

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    3. Manussos Marangudakis & Kostas Rontos & Maria Xenitidou, 2013. "State Crisis and Civil Consciousness in Greece," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 77, Hellenic Observatory, LSE.
    4. Vassilis Monastiriotis & Jacob A. Jordaan, 2011. "Regional Distribution and Spatial Impact of FDI in Greece: evidence from firm-level data," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 44, Hellenic Observatory, LSE.
    5. George Pagoulatos & Nikolaos Zahariadis, 2011. "Politics, Labor, Regulation, and Performance: lessons from the privatization of OTE," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 46, Hellenic Observatory, LSE.
    6. Lyrintzis, Christos, 2011. "Greek politics in the era of economic crisis: reassessing causes and effects," LSE Research Online Documents on Economics 33826, London School of Economics and Political Science, LSE Library.
    7. Helen Caraveli & Efthymios G. Tsionas, 2012. "Economic Restructuring, Crises and the Regions: The Political Economy of Regional Inequalities in Greece," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 61, Hellenic Observatory, LSE.

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    More about this item

    Keywords

    Regional Development; FDI; Productivity Spillovers; Greece; Spatial Heterogeneity.;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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