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European Trade and Foreign Direct Investment U-Shaping Industrial Output in Central and Eastern Europe; Theory and Evidence

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  • Patrick P. Walsh
  • Alexander Repkine

Abstract

We examine industrial output in Bulgaria, Hungary, Poland, and Romania during 1989–95 in terms of pretransitional product trade orientation. The growth of EU-oriented output within sectors of industry, ex-post trade, and market liberalization, is modeled as foreign direct investment induced Schumpeterian (vertical) waves of product innovation. The growth of non-EU-oriented output within sectors is modeled as unobservable deterministic heterogeneity. The results indicate that the gap observed in industrial output performance when comparing Eastern European to former Soviet countries is mainly explained by the inherited presence of EU-oriented production and its unconstrained growth over the transition period.

Suggested Citation

  • Patrick P. Walsh & Alexander Repkine, 1998. "European Trade and Foreign Direct Investment U-Shaping Industrial Output in Central and Eastern Europe; Theory and Evidence," IMF Working Papers 98/150, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:98/150
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    References listed on IDEAS

    as
    1. Gérard Roland & Thierry Verdier, 1999. "Transition and the output fall," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(1), pages 1-28, March.
    2. Aturupane, Chonira & Djankov, Simeon & Hoekman, Bernard, 1997. "Determinants of intra-industry trade between East and West Europe," Policy Research Working Paper Series 1850, The World Bank.
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    Citations

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    Cited by:

    1. Faggio, Giulia, 2007. "Job destruction, job creation and unemployment in transition countries: what can we learn?," LSE Research Online Documents on Economics 19716, London School of Economics and Political Science, LSE Library.
    2. Doyle, Orla & Walsh, Patrick Paul, 2005. "Did Political Constraints Bind During Transition? Evidence from Czech Elections 1990-2002," IZA Discussion Papers 1719, Institute for the Study of Labor (IZA).
    3. Bezuidenhout, Henri & Naude, Wim, 2008. "Foreign Direct Investment and Trade in the Southern African Development Community," WIDER Working Paper Series 088, World Institute for Development Economic Research (UNU-WIDER).
    4. Goran Vuksic, 2005. "Impact of foreign direct investment on Croatian manufacturing exports," Financial Theory and Practice, Institute of Public Finance, vol. 29(2), pages 131-158.
    5. repec:tcd:wpaper:tep15 is not listed on IDEAS
    6. Faggio, Giulia & Konings, Jozef, 1999. "Gross Job Flows and Firm Growth in Transition Countries: Evidence Using Firm Level Data on Five Countries," CEPR Discussion Papers 2261, C.E.P.R. Discussion Papers.
    7. Köke, Jens & Salem, Tanja, 2000. "Corporate finance and restructuring: evidence from Central and Eastern Europe," ZEW Discussion Papers 00-21, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    8. Jozef Konings & Ana Xavier, 2002. "Firm Growth and Survival in a Transition Country: Micro Evidence from Slovenia," LICOS Discussion Papers 11402, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    9. McGoldrick, Peter & Walsh, P. Paul, 2007. "Successful Factor Market Competition Pre-Privatisation? China`s eclectic.com," Research Technical Papers 3/RT/07, Central Bank of Ireland.
    10. Fiona Duffy & Patrick Paul Walsh, 2000. "A Regional Analysis of Wage Determination in Poland," LICOS Discussion Papers 8700, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    11. Magdalena RĂDULESCU & Luminiţa ŞERBĂNESCU, 2012. "The Impact of FDIs on Exports, and Export Competitiveness in Central and Eastern European Countries," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 2(1), pages 1-5, February.

    More about this item

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • P23 - Economic Systems - - Socialist Systems and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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