International Competition, Productivity and Regional Spillovers

Abstract: This thesis addresses empirically the interplay among international trade, foreign direct investment (FDI) and domestic market conditions, and its impact on competition, growth, exports and technology diffusion. Chapter two considers the potential relation between regional integration and productivity growth for the case of the European Union (EU). It is found that imports from other members is positively associated with productivity growth, while no impact from non-member imports is encountered, even if only developed non-members are considered. Chapter three concerns the impact of import competition on productivity growth, with special attention to the role of technology dispersion among firms. Using Swedish firm and industry level data, it is found that import competition triggers productivity growth in general, and that there is an additional impact in domestic industries with high technology dispersion among firms. Chapter four investigates whether the Single Market Program within the EU has had an impact on price-cost margins in Swedish industries previously protected by non-tariff barriers, so called sensitive industries. We find that average price-cost margins declined significantly after the implementation of the SMP in sensitive industries. A clear exception to this pattern is the food and beverage sector, a sector in which both sensitive and non-sensitive industries experienced a general increase in average price-cost margins over the time period. Chapter five discusses the idea that foreign-owned, export-oriented firms could have a positive impact on the export performance of local firms in the host country. A serious obstacle for potential exporters in developing countries is the lack of “export-know-how,” and foreign firms could stimulate local firms to begin exporting by showing them how to produce, market, sell and distribute manufactured goods on the world market. Since a major objective with EPZs is to attract export-oriented affiliates of foreign multinational enterprises, it is argued that host countries of EPZs can benefit from spillovers of know-how, i.e. a catalyst effect. Chapter six investigates empirically the quantitative impact of EPZs on developing countries’ export to the European Union. The study uses of the gravity model and addresses two questions: (i) whether EPZs have a positive impact on total host country exports, and (ii) if a significant catalyst effect is present. EPZs are found to have a positive impact on exports in several countries, but the effect varies across countries. For the case of Malaysia, a significant catalyst effect that is more or less constant over time is found.