Growth Effects of International Integration in Southeastern Europe: Implications on FDI and Trade

Abstract

International integration is explored through a sample of 9 countries in Southeastern Europe for a period of 13 years, from 1996 to 2009. A panel data approach is taken, using fixed effects and a within estimator model. The central questions of this study are to assess the directional effect of international integration on growth, to study the channels of transmission of such growth, and to measure the intensity of these relationships. The findings suggest that: an integrated region benefits more from trade in the form of exports, and less so from imports. Foreign direct investments are attracted to an integrated region more intensively, although inter-regional R&D expenditures in cost-oriented industries are not influencing growth to a considerable extent. The difference between high-tech and low-tech investments might give more conclusive results regarding this matter. For an integrated region where FDI and trade are intense, a competent and readily available labor force is found to affect growth incrementally more.

DOI: 10.5901/mjss.2014.v5n8p178