FDI and productivity convergence in Central and Eastern Europe: an industry-level investigation

Martin Bijsterbosch (1) , Marcin Kolasa (2, 3)

1 European Central Bank, DG Economics
2 National Bank of Poland, Economic Institute
3 Warsaw School of Economics

This paper presents empirical evidence of the effect of FDI inflows on productivity convergence in Central and Eastern Europe, using a new and harmonized industry-level data set. Four conclusions stand out. First, there is a strong convergence effect in productivity, both at the country and at the industry level. Second, FDI inflow plays an important role in accounting for productivity growth. Third, the impact of FDI on productivity critically depends on the absorptive capacity of recipient countries and industries. Fourth, there is important heterogeneity across countries, industries and time with respect to some of the main findings.

Keywords: Productivity convergence; FDI; Transition economies; Absorptive capacity; Panel data; C23; F21; O33

Martin Bijsterbosch, Marcin Kolasa. FDI and productivity convergence in Central and Eastern Europe: an industry-level investigation. Review of World Economics, 2010, 145 (4), pp.689-712. ⟨10.1007/s10290-009-0036-z⟩. ⟨hal-00555616⟩