Thursday, January 24

Eastern Europe, FDI and outsourcing

1. Ozlem Onaran and Engelbert Stockhammer, The effect of FDI and foreign trade on wages in the Central and Eastern European Countries in the post-transition era: A sectoral analysis for the manufacturing industry, Structural Change and Economic Dynamics Volume 19, Issue 1, , March 2008, Pages 66-80.
The aim of this paper is to estimate the effect of FDI and trade openness on average sectoral wages in the manufacturing industry in the CEECs in the post-transition era. We utilize a cross-country sector-specific econometric analysis based on one-digit level panel data for manufacturing industry in the Czech Republic, Hungary, Poland, Slovakia, and Slovenia for the period of 2000-2004. The results suggest that in the short run, productivity has a weak effect on wages, unemployment a strong one, FDI a positive one that is driven mostly by the capital intensive and skilled sectors, and international trade none. In capital-intensive sectors the effect of productivity seems stronger than in labor intensive ones, and the effect of unemployment seems stronger in unskilled sectors then in skilled ones. In the medium-run, the effects of productivity remain modest and that of unemployment stronger. Interestingly, the effect of FDI turns negative. Exports have a negative effect on wages and imports a positive one. However this negative effect can also be an indicator of inverse causality, and should be interpreted cautiously.
Keywords: Openness; European integration; Wage bargaining; CEECs

2. Matija Rojec and Joze P. Damijan, Relocation via foreign direct investment from old to new EU member states: Scale and structural dimension of the process, Structural Change and Economic Dynamics Volume 19, Issue 1, , March 2008, Pages 53-65.
The paper analyzes two issues related to the relocation via FDI from old to new EU member states. The first is the nature and scale of the relocation via FDI, i.e. the existing and future potential for relocations. The second is structural characteristics of the relocation process, i.e. which industries are in the heart of the process. We apply the so-called flying geese model (FGM) framework to analyze the structural trends in inward FDI to the new member states. We claim that it is mostly efficiency-seeking FDI in manufacturing, which is the bearer of the relocation process. The existing stock of efficiency-seeking FDI in the new member states is very small in terms of overall EU-15 outward FDI, but at the same time results in rather high level of foreign penetration in the new member states. These limit the existing and future scale of relocation to the new member states. In terms of the structural aspect of relocation, efficiency-seeking FDI in the new member states is increasingly in medium tech and in lower end segments of high tech industries, while the attractiveness of these countries for low tech labor intensive production is gradually vanishing. Low tech industries will be increasingly relocated outside EU-25.
Keywords: Foreign direct investment (FDI); Relocation process; Low tech industries

3. Martin Falk and Yvonne Wolfmayr, Services and materials outsourcing to low-wage countries and employment: Empirical evidence from EU countries, Structural Change and Economic Dynamics Volume 19, Issue 1, , March 2008, Pages 38-52.

This paper presents further insights into the employment effects of the international outsourcing of services to low-wage countries based on a sample of manufacturing and non-manufacturing industries for five EU countries. For the non-manufacturing sector, our results indicate that while the total of internationally purchased services is not important, purchased services from low-wage countries have a statistically significant but rather small negative impact on employment. In terms of the magnitude of its impact, the results suggest that outsourcing of services to low-wage countries has decreased employment by 0.2 percentage points per year from 1995 to 2000. However, we do not find any negative effect of the change of internationally purchased business services from low-wage countries on the demand for labour, suggesting in turn that other types of purchased services are responsible for the negative employment effects. For the manufacturing sector, while purchased services from low-wage countries is not significant, the outsourcing of intermediate materials to low-wage countries appears to have a relatively small negative impact on the demand for labour. The effect is more pronounced for intermediate materials from China and the East Asian countries than for those from Central and East European countries.
Keywords: International outsourcing of materials and services; Trade in intermediate inputs; Labour demand; Cross-country analysis

4. Wilfried Altzinger and Michael Landesmann, Relocation of production and jobs to Central and Eastern Europe--Who gains and who loses, Structural Change and Economic Dynamics Volume 19, Issue 1, , March 2008, Pages 1-3.

Keywords: Relocation of jobs; Central and Eastern Europe; Foreign direct investment; European integration

Technorati Tags: ,

No comments: