Research objectives and content Continued regional economic integration between the EU and the CEECs is very likely. This has led to increasing concern in both the economic literature and amongst policy-makers on the effects of such integration on trade, FDI and domestic employment. A negative impact on "domestic" employment can occur with further integration, due to substitution of trade by, FDI, or through diversion of investment to emerging regions. This research proposes to shed some light on this debate, given its importance for EU enlargement.
Two key questions are addressed:
.What makes trade and FDI complementary or substitutes, and which relationship prevails between the EU and the CEECs?
.Which conditions will lead to FDI creation/diversion, and has FDI into CEECs been created or diverted from Southern European countries?
To answer these, a theoretical model is developed where both the nature (horizontal/vertical) of FDI and the degree of integration between two regions matter. Empirical analysis will then test the model, using data on FDI, trade and employment, in the EU and the CEECs.
Training content (objective, benefit and expected impact)
The proposed field is new for the candidate, who in the past has treated development economics and EMU. Nevertheless, it represents another building block in the understanding of the broader issue of (European) economic integration. Completion of the project will make the candidate a more accomplished macro-economist, partly through the daily contact with Daniel Gros, who is an authority on issues related to the CEECs.
Links with industry / industrial relevance (22)
Because of the specific nature of the project, direct links with industry do not exist.