Naslov
Essays on foreign direct investment

Autori
Vukšić, Goran

Vrsta, podvrsta i kategorija rada
Ocjenski radovi, doktorska disertacija

Fakultet
Ekonomski fakultet

Mjesto
Beč

Datum
28.02

Godina
2008

Stranica
129

Mentor
Clemenz, Gerhard

Ključne riječi
Foreign direct investment ; tax and subsidies competition public inputs ; exports ; transition economies ; Central and Eastern Europe ; Croatia

Sažetak
This dissertation comprises three separate essays on foreign direct investment, presented in three chapters. The first chapter is a theoretical essay on competition for foreign direct investment among countries at different stages of development. The question it tries to answer is when less developed countries can win in this kind of competition. It is assumed that domestic companies in a more developed country use more capital in production, and that wages in a less developed country are lower. The paper explicitly models the empirical observation that countries tend to compete for foreign direct investment by providing public inputs, in addition to (or instead of) offering subsidies or tax reliefs to foreign investors. However, while only a foreign company benefits from tax incentives, additional public inputs increase the output of domestic companies as well. The results reveal that if governments of competing countries are not allowed to discriminate between domestic and foreign firms, there may be situations in which a less developed economy will attract foreign direct investment depending on the labor cost differential and the responsiveness of foreign and domestic companies to changes in the supply of public inputs. In addition, including public inputs in the model may alter the result as compared to including another location determinant that cannot be affected by public policy. There are situations in which consideration of public inputs will increase a less developed country’ s chances of winning the investment. If tax discrimination between domestic and foreign firms is permitted, both countries will optimally raise the supply of public inputs but the more developed country will always win the foreign investment. The second and the third chapters are empirical papers which investigate whether foreign direct investment inflows promote exports of host countries. The second chapter tests this relationship for 14 transition economies of Central and Eastern Europe, over the period between 1993 and 2001. It is well known that besides the direct effects of foreign direct investment on export performance, i.e. the exports of subsidiaries of multinationals, there are also potential indirect effects of foreign direct investment on the host economy and thus possibly on exports, for example through technology transfers and knowledge spillovers. Until now, there has been no study for these countries at the aggregate, macroeconomic level which would encompass the overall, direct and indirect effects of foreign direct investment on exports at the same time. The results suggest that, along with real effective exchange rates and development on export markets, foreign direct investment has been a significant determinant of export performance for the whole sample as well as for the two subsamples, in various model specifications. The third chapter is a refinement of the analysis in the second chapter. It uses sectoral level data to test for the relationship between foreign direct investment inflows and the exports of the Croatian manufacturing industry. The exports of the Croatian manufacturing industry have been stagnating over the last decade or so. Over the same period there have been relatively high inflows of foreign direct investment into industry. Using the panel data approach for 21 branches of the manufacturing industry over the period between 1996 and 2002, it is found that foreign direct investment has had a positive and statistically significant impact on exports: a 1% increase in inward FDI stock leads to a 0.09% increase of exports. This implies that there is a potential for improving the export performance of the Croatian manufacturing industry by attracting more foreign direct investment into this sector. Policy makers should try to enhance the potential positive effects of foreign investment by targeting specifically export- oriented foreign direct investment, and, in addition, implement measures to increase potential spillover effects.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA