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Inward FDI and regional performance in Europe after the Great Recession

Author

Listed:
  • Crescenzi, Riccardo
  • Ganau, Roberto

Abstract

This paper looks at inward foreign direct investment (FDI) and regional labour productivity in the aftermath of the Great Recession, exploring two FDI-induced effects. The first effect is linked with a capacity of FDI per se to trigger short-term productivity gains in response to a global shock. The second effect is associated with the degree of industrial diversification of these investment flows. The results suggest that it is not the amount of foreign investment received per se that matters for productivity recovery but its composition. A low degree of FDI diversification helped regions to gain productivity after the shock. The effect is stronger in regions with an industrial profile concentrated in a limited number of sectors, particularly in services. FDI can support regional recovery, but in the short run, it does so by matching and reinforcing existing regional specialisation profiles and to the benefit of services-oriented regions.

Suggested Citation

  • Crescenzi, Riccardo & Ganau, Roberto, 2024. "Inward FDI and regional performance in Europe after the Great Recession," LSE Research Online Documents on Economics 125406, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:125406
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    More about this item

    Keywords

    inward FDI; industrial profile; regional growth; European Union;
    All these keywords.

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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