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Workpackage 2
The competition effect of cross-border capital movement and domestic spillovers of FDI

Partner responsible:    UNOTT

Partners involved:       IEHAS      CESR      IERS      UNOTT

The objectives are sixfold:

  1. To provide a comprehensive review of the potential channels via which spillovers can be generated;
  2. To evaluate the relationship between host country characteristics and absorptive capacity;
  3. To assess the impact of inward investment in the adjustment of the transition economies;
  4. To review the evidence on spillovers from FDI in the transition economies;
  5. To estimate a range of models designed to identify spillovers from recent investments;
  6. To evaluate the policy implications of spillovers for economic catch-up in the transition economies.

Workpackage 2 will involve both qualitative and quantitative analysis; some elements will be desk based, some will involve fieldwork. The project will involve the following tasks:

  1. The existing literature on the motivation for FDI and the effects of FDI on the host country will be surveyed to provide a background for the empirical work.
  2. Coordination and harmonisation of existing firm/plant level databases to analyse the effects of FDI on different host countries for both developed and transition economies. For other countries further firm/plant level data will have to be collected.
  3. Empirical analysis of the determinants of FDI, paying particular attention to differences between transition and developed countries. This part of the workpackage will use firm/plant, sector and/or country level data as available, which will be analysed using panel data techniques.
  4. The focus here is on whether domestic firms benefit from the presence of foreign firms through increasing productivity, and whether FDI is a substitute or complement for imports in the host country. Cross-country comparisons between developed and transition economies will be carried out.

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Page last modified: 26 January, 2006