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The role of foreign direct investment and labor productivity in explaining croatian regional export dynamics

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Abstract

The potential benefits of trade openness and export led growth strategy are well documented in the empirical literature. As previous researches found evidence that international trade does not support convergence in GDP per capita of Croatian regions towards average EU GDP per capita, this paper investigates the role of foreign direct investments (FDI) and labour productivity in describing Croatian regional export dynamics for the period from 2004 to 2015. The results of the estimated panel models confirm the importance of strengthening manufacturing as well as strong comovements of exports and imports as a consequence of the internalization of product chains. Furthermore, the obtained results indicate that the main obstacles towards strengthening of the Croatian regional exports are the lack of domestic demand effect and decreasing labour productivity. Moreover, as FDI inflows are mostly directed towards service sector it is not surprising that the overall impact of FDI inflows on exports is negative. Although one of the declared goals of Croatian policy makers is attracting FDI into export industries, the effects and, first of all, proper policy measures are yet to be seen.

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Fig. 1

Source: Author’s calculation based on Croatian Employment Service (CES) and Croatian Bureau of Statistics (CBS) data

Fig. 2

Source: Author’s calculation based on Croatian Bureau of Statistics (CBS) data

Fig. 3

Source: Author’s calculation based on CBS data

Fig. 4

Source: Authors’ calculation based on CBS data

Fig. 5

Source: Authors’ calculation based on CBS data

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Notes

  1. Regional real GDP per capita is expressed in 2015 prices.

  2. In balanced panel models, the test statistic is asymptotically equivalent to the Hausman fixed-versus-random effects test. However, unlike the Hausman version, test extends straightforwardly to heteroskedastic- and cluster-robust versions and is guaranteed to generate a nonnegative test statistic (Arellano 1993; Wooldridge 2002).

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Acknowledgements

This work has been fully supported by Croatian Science Foundation under the project (IP-2014-09-5476).

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Authors and Affiliations

  1. Faculty of Economics and Business, University of Zagreb, Trg J. F. Kennedyja 6, 10000, Zagreb, Croatia

    Saša Jakšić, Nataša Erjavec & Boris Cota

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  1. Saša Jakšić
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  2. Nataša Erjavec
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  3. Boris Cota
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Correspondence to Saša Jakšić.

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Jakšić, S., Erjavec, N. & Cota, B. The role of foreign direct investment and labor productivity in explaining croatian regional export dynamics. Cent Eur J Oper Res 27, 835–849 (2019). https://doi.org/10.1007/s10100-018-0583-2

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