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Export Spillovers in Central & Eastern Europe

Export Spillovers in Central & Eastern Europe. Tine Jeppesen FIW Research Conference Vienna December 10 th 2010. Outline of Presentation. Research Question and Motivation Contributions of paper Theory & Literature Data & Empirical methodology Results

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Export Spillovers in Central & Eastern Europe

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  1. Export Spillovers in Central & Eastern Europe Tine Jeppesen FIW Research Conference Vienna December 10th 2010

  2. Outline of Presentation • Research Question and Motivation • Contributions of paper • Theory & Literature • Data & Empirical methodology • Results • Conclusion

  3. Research Question Research Question & Motivation • Does FDI affect the export participation and performance of domestic firms? • What are the channels of export spillovers? • Horizontal / Vertical linkages

  4. Why study export spillovers? Research Question & Motivation • Promoting exports is common policy goal • Correlation between growth of real exports and real output (Greenaway 2004 European Journal of Political Economy) • Exporting causes productivity increases? De Locker (2007) JIE • Export spillovers may be an additional benefit from hosting FDI

  5. Contributions Contributions • Evidence from multiple countries • Region where FDI is increasing rapidly • Firm-level information on vertical linkages

  6. Theoretical Framework Theory & Literature • Findings in empirical literature on export behaviour • Sunk costs (Roberts & Tybout, 1997) • Exporter are more productive than non-exporters (Bernard & Jensen ; Melitz, 2003) • MNEs can affect export performance of domestic firms by • Lowering sunk costs • Increasing domestic productivity

  7. Theory & Literature Channels of export spillovers: Horizontal spillovers • Foreign market information (Aitken et al. 1997 JIE) • Knowledge/ technology spillovers (labour movements, imitation) • Competition (Greenaway et al. 2004 European J. of political Economy)

  8. Theory & Literature Channels of export spillovers: Vertical spillovers • Greater scope for spillovers? (Javorcik, 2004 AER) • Evidence of productivity spillovers to upstream industries in Eastern Europe (Javorcik, 2004 AER ; Gorodnichenkoet al. 2007 IZA; Javorcik and Spatareanu, 2009) • Information, reputational effects

  9. Data Data and empirical methodology • Enterprise Surveys, The World Bank Group • Firm-level data • Survey rounds: 2002, 2005, 2008/09 • Survey universe ‘commercial, service or industrial business establishments with at least five fulltime employees’ • 2002 and 2005: Quota Sampling • 2008/09: Stratified random sampling

  10. Data and empirical methodology Data continued • 23 countries Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Croatia, Czech Rep. Estonia, Georgia, Hungary, Kazakhstan, Kyrgyz Rep. Latvia, Lithuania, Moldova, Poland, Romania, Russia, Slovakia, Slovenia, Tajikistan, Turkey, Ukraine. • Manufacturing industries ISIC Rev.3.1: 15-37 • Small, medium and large firms

  11. Data and empirical methodology Data continued • Multinationals are bigger, more productive, use a higher share of foreign inputs, supply a higher share of inputs to other multinationals and are more export oriented than domestic firms. • The same differences are found between domestic exporters and non-exporters.

  12. Empirical Strategy Data and empirical methodology • Heckman selection model • Exclusion restriction: International quality certification (ISO 9000, ISO 1400) • Model is estimated only on domestic firms. Exclude government owned enterprises. • Small sample size: Only include industries with more than 5 firms

  13. Spillover Measures Data and empirical methodology • Horizontal • Hor_empjkt • Hor_expjkt • Vertical • Share of output sold to MNE within the country (2002, 2005) • Share of inputs of foreign origin

  14. Control variables Data and empirical methodology • Industry level controls • Industry share of total country exports • Industry share of total country employment • Standard firm-level controls • Labour productivity • Employment • Age • Country, year, industry dummies

  15. Mean differences Exporters and Non-exporters

  16. Industry level Data and empirical methodology

  17. Results: All Firms *** p<0.01, ** p<0.05, * p<0.1 Clustered adjusted standard errors in parentheses all regressions include country, year and industry dummies. Wald test rejects independence between participation and performance equation Constant not shown

  18. Results: Small Firms *** p<0.01, ** p<0.05, * p<0.1 Clustered adjusted standard errors in parentheses all regressions include country, year and industry dummies. Wald test rejects independence between participation and performance equation Constant not shown

  19. Results: Larger Firms *** p<0.01, ** p<0.05, * p<0.1 Clustered adjusted standard errors in parentheses all regressions include country, year and industry dummies. Wald test rejects independence between participation and performance equation Constant not shown

  20. Conclusion Conclusion • Effect of MNEs on domestic export performance is complex • Different effects of horizontal and vertical spillovers • Vertical linkages positively affects both export participation and intensity. Underlines importance of local linkages.

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