Does International Openness Affect Productivity of Local Firms? Evidence from Southeastern Europe

LICOS Discussion Paper 219/2008

31 Pages Posted: 30 Mar 2009

See all articles by Jože P. Damijan

Jože P. Damijan

University of Ljubljana, Slovenia - Department of International Economics

José de Sousa

Universite Paris I Pantheon-Sorbonne; Université Rennes I

Olivier Lamotte

Paris School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: 2008

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 middle income countries. Using firm-level data 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 ccount, (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.

Keywords: trade liberalisation, international trade, foreign ownership, total

JEL Classification: F14, D24, L25

Suggested Citation

Damijan, Joze P. and de Sousa, José and Lamotte, Olivier, Does International Openness Affect Productivity of Local Firms? Evidence from Southeastern Europe (2008). LICOS Discussion Paper 219/2008. Available at SSRN: https://ssrn.com/abstract=1360692 or http://dx.doi.org/10.2139/ssrn.1360692

Joze P. Damijan (Contact Author)

University of Ljubljana, Slovenia - Department of International Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia
+386 61 189 24 00 (Phone)
+386 61 189 26 98 (Fax)

José De Sousa

Universite Paris I Pantheon-Sorbonne ( email )

106-112 Bd. de l'Hopital
75634 Paris Cedex 13
France

Université Rennes I ( email )

11 Rue Jean Macé
Rennes, Rennes 35700
France

Olivier Lamotte

Paris School of Business ( email )

59 rue Nationale
75013
France

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