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Coming and Going: Gains and Losses from Relocations Affecting Hungary

Author

Listed:
  • Gabor Hunya

    (The Vienna Institute for International Economic Studies, wiiw)

  • Magdolna Sass

Abstract

Relocation is a way of reducing costs, thus increasing competitiveness, by splitting production and services between countries. The main argument kindling the relocation debate suggests that moving abroad generates job losses in the home country, while production and job gains appear only in the host country. However, positive effects are also present in the home country, due to increasing the overall competitiveness of the companies engaged in relocation, which allows the upgrading of products and jobs. Likewise, income repatriation is a financial gain for the home country, as it may generate further jobs. The aim of this paper is to shed some light on the size and the labour market effects of relocations in new EU member states (NMS), most notably in Hungary. The discussion starts with an overview of the definition and expected impacts of relocation. Then it moves to the evidence provided by data on FDI and FDI-related income flows. The issue of job creation and destruction is discussed, based on the employment effects of FDI in host countries and on corporate restructuring data in both home and host countries. The main part of the paper is devoted to an analysis of reported relocation cases to and from Hungary between mid 2003 and September 2005. We have found evidence for the existence of relocation from the EU-15 to the NMS. The number of cases in Hungary amounts to one fifth of the registered FDI projects. But the number of jobs transferred is fairly modest, concentrating in the automotive and the electronics sectors. Relocation-related job losses in home countries are not very numerous either; but they are sectorally and geographically concentrated in those countries which already suffer from unemployment and competitiveness problems. Relocation to and from Hungary is mainly confined to Europe, even if the owner of the transnational company is from a different continent. Also when moving out from NMS locations, multinationals remain in the vicinity and seldom go to China. We have found the FDI-related income transfers significant, but could not assess their impact on job creation in the home country of transnationals.

Suggested Citation

  • Gabor Hunya & Magdolna Sass, 2005. "Coming and Going: Gains and Losses from Relocations Affecting Hungary," wiiw Research Reports 323, The Vienna Institute for International Economic Studies, wiiw.
    • Handle: RePEc:wii:rpaper:rr:323
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    Citations

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    Cited by:

    1. Leonhard Plank & Cornelia Staritz, 2013. "‘Precarious upgrading’ in electronics global production networks in Central and Eastern Europe: the cases of Hungary and Romania," Global Development Institute Working Paper Series ctg-2013-31, GDI, The University of Manchester.
    2. Magdolna Sass, 2012. "Internationalisation of innovative SMEs in the Hungarian medical precision instruments industry," Post-Communist Economies, Taylor & Francis Journals, vol. 24(3), pages 365-382, March.
    3. Rojec, Matija & Damijan, Joze P., 2008. "Relocation via foreign direct investment from old to new EU member states: Scale and structural dimension of the process," Structural Change and Economic Dynamics, Elsevier, vol. 19(1), pages 53-65, March.
    4. Eric Rugraff & Magdolna Sass, 2016. "Voting for staying. Why didn’t the foreign-owned automotive component suppliers relocate their activity from Hungary to lower-wage countries as a response to the economic crisis?," Post-Communist Economies, Taylor & Francis Journals, vol. 28(1), pages 16-33, January.
    5. Kalotay, Kálmán, 2007. "Csaba László: The New Political Economy of Emerging Europe. Akadémiai Kiadó, Budapest, 2007, második, átdolgozott és bővített kiadás, 400 oldal ISBN: 978 963 05 8459 3 [Csaba László: The new politi," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 941-944.
    6. Magdolna Sass & Martina Fifekova, 2010. "Offshoring and Outsourcing Business Services to Central and Eastern Europe: Some Empirical and Conceptual Considerations," European Planning Studies, Taylor & Francis Journals, vol. 19(9), pages 1593-1609, October.
    7. Plank, Leonhard & Staritz, Cornelia, 2013. ""Precarious upgrading" in electronics global production networks in Central and Eastern Europe: The cases of Hungary and Romania," Working Papers 41, Austrian Foundation for Development Research (ÖFSE).
    8. Eric Rugraff, 2010. "Strengths and weaknesses of the outward FDI paths of the Central European countries," Post-Communist Economies, Taylor & Francis Journals, vol. 22(1), pages 1-17.
    9. Ghibutiu, Agnes & Poladian, Simona, 2009. "Global Sourcing Of Services: How Well Are The New Eu Member States Coping With The Challenges? (Part I)," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 6(1), pages 123-135, March.
    10. Gál, Zoltán, 2010. "Future Bangalores? The increasing role of Central and Eastern Europe in the global services offshoring market: evidence from trade statistics," MPRA Paper 28360, University Library of Munich, Germany, revised 25 Oct 2010.
    11. Agnes Ghibuţiu, 2009. "Romania’S Trade In Services: Reaping The Benefits Of Globalization," Romanian Economic Business Review, Romanian-American University, vol. 4(2), pages 13-32, June.

    More about this item

    Keywords

    relocation; offshoring; FDI; labour market; Hungary;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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