Export Structure Upgrading and Economic Growth in the Western Balkan Countries
In: Emerging markets, finance and trade: EMFT, Band 55, Heft 10, S. 2185-2210
ISSN: 1558-0938
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In: Emerging markets, finance and trade: EMFT, Band 55, Heft 10, S. 2185-2210
ISSN: 1558-0938
In: Eastern European economics: EEE, Band 54, Heft 1, S. 49-70
ISSN: 1557-9298
In: Post-communist economies, Band 25, Heft 3, S. 371-391
ISSN: 1465-3958
As a consequence of the increasing globalization and integration of the world's markets, there has been an intensive process of international fragmentation of the production over the last few decades. This phenomenon whereby previously integrated productive activities are segmented and internationally spread is reflected in the rapid increase in parts and components trade, growing at higher rates than final goods trade. In this process, the Western Balkan countries (WBC) have not been an exception. With their recent integration into the global markets, the WBC have witnessed growth in parts and components trade that has even exceeded the world average. This paper examines the determinants of the trade that stems from the international fragmentation of production in the WBC. Using a panel data set of disaggregated bilateral trade flows, we estimate gravity equations for the period 2000-2009. Our findings support the hypothesis drawn from the theory of fragmentation that trade in parts and components is motivated by labor cost differences and by geographical and proximity reasons. The relevance of additional service link costs, as well as the influence of institutional similarity and infrastructure quality or political-economic agreements is also confirmed by our empirical research.
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Serbia spends relatively large amounts on state aid programs, many of which will have to be phased out or restructured to comply with EU laws. There is room to restructure the existing programs to target activities that have more growth and job dividends; for example, by targeting startups and innovating firms and phasing out support for ailing industries, state-owned enterprises, and large or old private domestic firms. Although Serbia's program to attract foreign direct investment has helped create new jobs, the focus should now shift to instruments that facilitate technology spillovers and domestic linkages. Finally, improving the scope and quality of data collection will contribute to better monitoring and more efficient targeting. The sooner Serbia starts to adjust its state aid programs, the larger the economic and fiscal benefits will be.
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Evidence from several countries reveals that nations that have open economies tend to enjoy higher income than those with closed economies (Lind and Ramondo 2018). Openness to hosting multinationalfirms can lead to firms in receiving countries acquiring new technology and skills (Harrison and Rodriguez-Clare 2010), and to productivity-enhancing spillovers, particularly through vertical commercial relationships between foreign and domestic suppliers. Learning by exporting offers positive knowledge externalities, and it comprises myriad ways in which exports can stimulate growth in productivity, including development of exporter capabilities, such as marketing new products; upgrading product quality; and acquiring expertise in managing customer relationships by dealing with foreign buyers. The value from knowledge spillovers and the promise of job creation are often seen as positive externalities and are usually brought in to justify policy interventions in the form of tax incentives, grants, and other concessions (access to land sites at minimal or low cost). It is often thought that spillovers from foreign firms are driven by transfers of technology and by learning about markets by exporting. Learning from foreign buyers is supposed to be channeled directly to the exporters or passed through to local suppliers and competitors in domestic markets. There is some evidence that in Serbia, the international competitiveness of domestic exporters has been diminishing, and government programs to support links with markets receive meager financial allocations. Recent successes in exports of manufactures have revealed the great potential of Serbia, but these have been driven by only a few firms, many of them foreign-owned. This has lowered expectations of inclusive and widespread growth. There is also a growing sense that government efforts to promote exports and attract export-oriented investment in Serbia have instead been directed to attracting foreign direct investment (FDI) at the expense of export promotion, which has not been particularly effective. A looming question has become whether the current policy mix for promoting competitive Serbian exports needs realignment.
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In: World Bank Policy Research Working Paper No. 3
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Working paper
In: World Bank South East Europe Regular Economic Report No. 83136
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In: Economic Premise No. 103, Poverty Reduction and Economic Management, World Bank.
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