Border Regimes and Indirect Productivity Effects from Foreign Direct Investment

29 Pages Posted: 10 Apr 2019

See all articles by Bruno Merlevede

Bruno Merlevede

Ghent University - Department of General Economics

Victoria Purice

Ghent University

Date Written: March 1, 2019

Abstract

Supplying inputs to foreign affiliates is consistently found to be an important source of productivity gains for domestic firms. We analyse the impact of border regimes on the existence and size of cross-border indirect productivity effects, exploiting variation in the pace and extent of European integration of seven Central and Eastern European countries and their neighbours during the period 2000-2010. EU-membership is a necessary condition for positive cross-border indirect productivity effects through backward linkages. Schengen area participation further magnifies cross-border effects. Our results bear testimony to the successful EU integration of CEECs and warn about potential productivity costs to local firms should border restrictions be reinstated.

Keywords: FDI, Productivity, Spillovers, Borders

JEL Classification: F2, D24

Suggested Citation

Merlevede, Bruno and Purice, Victoria, Border Regimes and Indirect Productivity Effects from Foreign Direct Investment (March 1, 2019). Available at SSRN: https://ssrn.com/abstract=3357499 or http://dx.doi.org/10.2139/ssrn.3357499

Bruno Merlevede (Contact Author)

Ghent University - Department of General Economics ( email )

Tweekerkenstraat 2
Ghent, 9000
Belgium

Victoria Purice

Ghent University ( email )

Coupure Links 653
Gent, 9000
Belgium

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