Investment Creation and Diversion in an Integrating Europe

THE FUTURE COMPETITIVENESS OF THE EU AND ITS EASTERN NEIGHBOURS: PROCEEDING OF THE CONFERENCE, Peeter Vahtra and Elina Pelto, eds., pp. 49-65, Pan-European Institute, Turku, Finland, 2007

17 Pages Posted: 5 Apr 2007

See all articles by Kalman Kalotay

Kalman Kalotay

United Nations Conference on Trade and Development (UNCTAD); UNCTAD

Abstract

This paper explores how the current and forthcoming expansions of the European Union (EU) affect foreign direct investment (FDI) inflows in the European continent. The analysis will use the theory of investment creation/diversion/restructuring, developed by Dunning & Robson (1998) as an extension of Viner's (1950) trade theory (trade creation versus trade diversion). Using in particular the experience of Hungary with relocations to illustrate its main point, it concludes that investment creation in Europe is rather weak, and hence is not expected to contribute to the EU's declared ambition to become the most competitive economy in the world. Moreover, the political turmoil of some new EU member countries in 2006 (in particular Hungary) indicates that a lack of effective restructuring in the expanded EU can cause dissatisfaction in countries expected to catch up with the EU-15 in a short period of time but not having the full possibilities to gain the productive capacities to do that.

Keywords: European Union, foreign direct investment, enlargement, labour productivity, tax

JEL Classification: F23, O52, F15, J31, H32

Suggested Citation

Kalotay, Kalman, Investment Creation and Diversion in an Integrating Europe. THE FUTURE COMPETITIVENESS OF THE EU AND ITS EASTERN NEIGHBOURS: PROCEEDING OF THE CONFERENCE, Peeter Vahtra and Elina Pelto, eds., pp. 49-65, Pan-European Institute, Turku, Finland, 2007. Available at SSRN: https://ssrn.com/abstract=977935

Kalman Kalotay (Contact Author)

United Nations Conference on Trade and Development (UNCTAD) ( email )

Division on Investment, Technology and Enterprise
Palais des Nations
Geneva, 1211
Switzerland

UNCTAD ( email )

Division on Investment, Technology and Enterprise
Palais des Nations
Geneva, 1211
Switzerland

Register to save articles to
your library

Register

Paper statistics

Downloads
137
Abstract Views
934
rank
206,894
PlumX Metrics