Direct Foreign Investments and Productivity Growth in Hungarian Firms, 1992-1999
CEPII Working Paper
SGARD Jérôme - (Author)
Paris : Centre d'études prospectives et d'informations internationales
CEPII Working Paper : 2001-19
Foreign Direct Investment, property rights, Productivity, Hungary, Transition, Panel
The impact of FDI on total factor productivity in Hungary during the 1990s' is assessed with a large enterprise panel. Foreign equity is associated with higher productivity levels and has a substantial, positive spillover effect on aggregate TFP growth. However, this benefit is significant only when associated with export orientation, while inward-looking FDI has negative side effects. Regionally, the north-western area, close to EU borders, benefits much more from FDI, whether foreign-owned or locally-owned private firms are considered. Otherwise, only the later absorb a reduced volume of externalities. Finally, State ownership implies lower levels of productivity, but does not hinder the capacity to respond to market incentives, including FDI induced externalities.