FDI as Force of Convergence in the CESEE Countries

Septimiu Szabo () and Jorge Durán
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Septimiu Szabo: DG ECFIN, European Commission

Chapter Chapter 3 in Does EU Membership Facilitate Convergence? The Experience of the EU's Eastern Enlargement - Volume II, 2021, pp 37-66 from Palgrave Macmillan

Abstract: Abstract Trade and access to international capital markets are often assumed to support countries’ development, notably through technology transfers that support convergence. In this chapter we review economic developments in the EU Central, Eastern and Southeastern (CESEE) countries (namely Bulgaria, Croatia, Czechia, Estonia, Latvia, Lithuania, Malta, Poland, Romania, Slovenia and Slovakia) since the late 1990s, linking their take-off to the opening to trade and infusion of foreign direct investment (FDI), largely facilitated by the EU accession and geographical proximity. The region has had one of the most significant growth of foreign investment as a share of GDP in the recent global history, and this has contributed to productivity convergence. We argue that FDI increased the well-being of people, by bringing in new jobs and higher wages, led to technological spillovers to domestic firms and increased efficiency and innovation in the market. Various trade-offs, particularly regarding the political implications of privatising national resources, repatriating profits and agglomeration effects are also acknowledged. We conclude that FDI can act as a force of growth and convergence when it comes alongside with a strong institutional, legal and regulatory environment, on the likes of the EU Single Market.

Keywords: Investment; FDI; Spillovers; Productivity (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:pal:stuchp:978-3-030-57702-5_3

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DOI: 10.1007/978-3-030-57702-5_3

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