Growth and Convergence in European Transition Economies: The Impact of Foreign Direct Investment

Jasminka Sohinger

Eastern European Economics, 2005, vol. 43, issue 2, 73-94

Abstract: Foreign direct investment (FDI), with its growth-enhancing capacity, has played a significant role in setting the transition economies onto the path of convergence with their more affluent neighbors, which is enhanced by their recent membership in one of the richest clubs in the world, the European Union. The differential impact of FDI in terms of its sectoral composition on productivity and efficiency of the host country, as well as its propensity to stimulate institution building, are changing both the economic and political landscapes in the Central and Eastern European and Baltic region. The implicit requirements that FDI poses for the receiving country together with the EU accession-driven reforms fit together in a mutually reinforcing system that is helping the goals of transition and the convergence process. The achievement of both goals is seen as the best guarantor of peace and security in the Central and Eastern European and Baltic region.

Date: 2005
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