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Does FDI promote regional development? Evidence from local and regional productivity spillovers in Greece

Author

Listed:
  • Vassilis MONASTIRIOTIS

    (London School of Economics, United Kingdom)

  • Jacob A. JORDAAN

    (VU University Amsterdam, the Netherland)

Abstract
Studies on the productivity spillovers of FDI have concentrated on the nationalsectoral level. As a result, little is known about the impact of FDI on absolute and relative regional economic performance. In this paper we examine this issue by relying on a unique dataset of over 20,000 Greek firms for the period 2002-2006 covering all sectors of economic activity. We examine the spatial distribution of foreign-owned firms in the country and analyse the effect that their presence – at the local, regional and national levels – has on the productivity of domestic firms. We find strong evidence suggesting that foreignowned firms self-select into regions and sectors of high productivity. Net of this selection effect, the impact of foreign presence on domestic productivity is negative – although at the very local level some positive spillover effects are identifiable. The bulk of the effects concentrate in non-manufacturing activities, high-tech sectors, and medium-sized high-productivity firms. Importantly, this effect is not constant across space however. Productivity spillovers tend to be negative in the regions hosting the main urban areas in the country but positive in smaller and more peripheral regions. In this way, despite the tendency of FDI to concentrate in a limited number of areas within the country – those of the highest level of development – the externalities that FDI activity generates to the local economies appear to be of a rather equilibrating character. Key words: regional development, FDI, productivity spillovers, Greece, spatial heterogeneity

Suggested Citation

  • Vassilis MONASTIRIOTIS & Jacob A. JORDAAN, 2010. "Does FDI promote regional development? Evidence from local and regional productivity spillovers in Greece," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 1, pages 139-164, December.
    • Handle: RePEc:jes:journl:y:2010:v:1:p:139-164
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    References listed on IDEAS

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    1. Monastiriotis, Vassilis, 2014. "Origin of FDI and domestic productivity spillovers: does European FDI have a 'productivity advantage' in the ENP countries?," LSE Research Online Documents on Economics 55267, London School of Economics and Political Science, LSE Library.
    2. Ines Kersan-Skabic & Lela Tijanic, 2014. "The Influence of Foreign Direct Investments on Regional Development in Croatia," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 16(2), pages 59-90, December.
    3. Monastiriotis, Vassilis, 2016. "Institutional proximity and the size and geography of FDI spillovers: do European firms generate more favourable productivity spillovers in the EU neighbourhood?," LSE Research Online Documents on Economics 66141, London School of Economics and Political Science, LSE Library.
    4. Vujanović, Nina & Stojčić, Nebojša & Hashi, Iraj, 2021. "FDI spillovers and firm productivity during crisis: Empirical evidence from transition economies," Economic Systems, Elsevier, vol. 45(2).
    5. Vassilis Monastiriotis, 2016. "Institutional proximity and the size and geography of foreign direct investment spillovers: Do European firms generate more favourable productivity spillovers in the European Union neighbourhood?," Environment and Planning C, , vol. 34(4), pages 676-697, June.
    6. Bitzenis, Aristidis & Vlachos, Vasileios, 2014. "Διεθνής Επιχειρηματική Δραστηριότητα Στην Ελλάδα Την Εποχή Του Ευρώ: Ανταγωνιστικότητα Και Εξωστρέφεια [International business activity in Greece in the euro era: Competitiveness and extroversion]," MPRA Paper 120885, University Library of Munich, Germany.
    7. Pietro Pizzuto, 2020. "The role of regional competitiveness in shaping the heterogeneous impact of the Great Recession," Regional Science Policy & Practice, Wiley Blackwell, vol. 12(2), pages 267-290, April.
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    9. CHRISTOFAKIS, M. & GKOUZOS, Andreas, 2013. "Regional Specialization And Efficiency Of The Agricultural Sector In Greece: The Relationship With Regional Funding Allocation," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 13(1), pages 119-130.
    10. Lin, Mi & Kwan, Yum K., 2016. "FDI technology spillovers, geography, and spatial diffusion," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 257-274.
    11. VPhuong V. Nguyen, Khoa T. Tran, Nga Thuy Thanh Le and Hoa Doan Xuan Trieu, 2020. "Examining FDI Spillover Effects on Productivity Growth: Firm-Level Evidence from Vietnam," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 45(1), pages 97-121, March.
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