Institutional proximity and the size and geography of FDI spillovers: do European firms generate more favourable productivity spillovers in the EU neighbourhood?

Vassilis Monastiriotis ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The EU association framework provides European businesses with an entry advantage into the associated countries by facilitating production links and encouraging institutional convergence. It is believed that this has multiple beneficial effects for the associated countries, including ones related to productivity spillovers accruing to domestic firms. However, no empirical evidence exists to show that the presence of European firms produces larger productivity spillovers in recipient economies compared to firms from other world regions. We examine this question using firm-level data covering 28 transition countries over the period 2002-2009. We estimate the intra-industry productivity effects of foreign ownership and examine how these differ across regional blocks (CEE, SEE and ENP), by origin of investor (EU15 versus non-EU15), across geographical scales (national versus regional) and for different types of locations (capital-city regions versus the rest). Our results suggest that investments of EU origin play a distinctive role, helping raise domestic productivity in the associated countries unlike investments from outside the EU. However, this process operates in a spatially selective manner, potentially enhancing regional disparities and spatial imbalances. This assigns a particular responsibility for EU policy to devise interventions that will help redress these problems within its existing association framework.

Keywords: EU neighbourhood; FDI spillovers; institutional proximity; regional disparities (search for similar items in EconPapers)
JEL-codes: J01 R14 (search for similar items in EconPapers)
Date: 2016-04-29
New Economics Papers: this item is included in nep-cse, nep-eff, nep-eur, nep-geo, nep-int, nep-sbm and nep-ure
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Citations: View citations in EconPapers (2)

Published in Environment and Planning C: Government and Policy, 29, April, 2016, 34(4), pp. 676-697. ISSN: 0263-774X

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:66141

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