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Does international openness affect productivity of local firms? Evidence from Southeastern Europe

Author

Listed:
  • Joze P. Damijan
  • Jose de Sousa
  • Olivier Lamotte

Abstract

This paper examines the role of international openness on the change of firm productivity in Southeastern Europe (SEE). This is a crucial question for middel income countries. Using firm-level date for six transition economies over the period 1994-2002, we identify whether foreign ownership and propensity to trade with more advanced countries can bring about higher learning effects. We find that (i) foreign ownership has helped at restructuring and enhancing productivity of local firms in four out of six countries, (ii) exporting to advanced markets has a larger impact on productivity growth in four countries, especially when firm's absorptive capacity is taken into account, (iii) in contrast, exporting to the less competitive markets of ex-Yugoslavia seems to affect negatively the productivity growth in three countries, and (iv) learning effects from importing follow a similar path than exporting. Our results suggest that trade liberalisation is not uniformly beneficial. Regional composition of trade flows and absorptive capacity of local firms matter. Trade liberalisation within the SEE region thus may not provide a substitute for a general trade liberalisation and access to the more competitive markets of OECd countries.

Suggested Citation

  • Joze P. Damijan & Jose de Sousa & Olivier Lamotte, 2008. "Does international openness affect productivity of local firms? Evidence from Southeastern Europe," LICOS Discussion Papers 21908, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  • Handle: RePEc:lic:licosd:21908
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    File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp219.pdf
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    References listed on IDEAS

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    Blog mentions

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    1. Kam in kaj izvažamo je ključno
      by d1joze in Damijan blog on 2009-01-17 16:35:00

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    Cited by:

    1. Bessonova, Eugenia, 2010. "Efficiency of Manufacturing in Russia: Effect of Domestic Competition and FDI," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 17(1), pages 106-127.
    2. Emanuele Forlani, 2017. "Irish Firms’ Productivity and Imported Inputs," Manchester School, University of Manchester, vol. 85(6), pages 710-743, December.

    More about this item

    Keywords

    international trade; trade liberalization; foreign ownership; total factor productivity; transition economics;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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