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FDI as Force of Convergence in the CESEE Countries

In: Does EU Membership Facilitate Convergence? The Experience of the EU's Eastern Enlargement - Volume II

Author

Listed:
  • Septimiu Szabo

    (DG ECFIN, European Commission)

  • Jorge Durán Laguna

    (DG ECFIN, European Commission)

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.

Suggested Citation

  • Septimiu Szabo & Jorge Durán Laguna, 2021. "FDI as Force of Convergence in the CESEE Countries," Studies in Economic Transition, in: Michael Landesmann & István P. Székely (ed.), Does EU Membership Facilitate Convergence? The Experience of the EU's Eastern Enlargement - Volume II, chapter 0, pages 37-66, Palgrave Macmillan.
    • Handle: RePEc:pal:stuchp:978-3-030-57702-5_3
    DOI: 10.1007/978-3-030-57702-5_3
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