Export concentration is a fundamental concern, by and large to developing economies where a limited range of products (disproportionately) make export earnings up. Among other objectives, to expand export bases and activities, these countries have attracted a substantial amount of FDI by providing numerous incentives and easing stringent regulations. But little has been done in demonstrating whether FDI helps reduce export concentrations. Using highly disaggregated CEPII's exports data of 67 developing economies for the years 1995 to 2018, this thesis empirically examined the impact of FDI (stock and inflow) on export concentrations (by products and destination markets). I constructed a panel of Herfindahl-Hirschman indices of export concentrations inverse measures of export diversifications for each country in which FDI was modeled as a determinant. And the empirical analysis was accomplished by a Fixed Effects method. Empirical findings show that FDI does significantly and negatively affect overall export concentrations (both by products and destination markets) of host economies under the study, i.e., it promotes export diversifications. As such, attracting FDIs helps host economies combat dependency on a restricted set of export commodities and markets (trade partners).
Export concentration is a fundamental concern, by and large to developing economies where a limited range of products (disproportionately) make export earnings up. Among other objectives, to expand export bases and activities, these countries have attracted a substantial amount of FDI by providing numerous incentives and easing stringent regulations. But little has been done in demonstrating whether FDI helps reduce export concentrations. Using highly disaggregated CEPII's exports data of 67 developing economies for the years 1995 to 2018, this thesis empirically examined the impact of FDI (stock and inflow) on export concentrations (by products and destination markets). I constructed a panel of Herfindahl-Hirschman indices of export concentrations inverse measures of export diversifications for each country in which FDI was modeled as a determinant. And the empirical analysis was accomplished by a Fixed Effects method. Empirical findings show that FDI does significantly and negatively affect overall export concentrations (both by products and destination markets) of host economies under the study, i.e., it promotes export diversifications. As such, attracting FDIs helps host economies combat dependency on a restricted set of export commodities and markets (trade partners).
Since export concentration entails considerable risk, most countries prioritize expansion of export bases to counter instability of foreign earnings and/or to improve overall trade performance in the global market. Arguably, export concentration highly characterizes preponderance of developing economies: by and large low income, landlocked, and primary commodity dependent nations. Having been restrained by shortage of finance domestically, many of these countries have resorted to attracting foreign capitals, among other Foreign Direct Investment (FDI), to complement internal investment gaps and needs to enhance productivity and output varieties for local use and export. For instance, only 2018, inflows of FDI to Africa increased by 11% (UNCTAD, 2019), though potential explanations around the impacts of FDI in the continent have been contentious. Thus, this study will particularly explore the impacts of FDI on export concentration (export diversification) of developing countries. It addresses question whether FDI (inflows and stocks) helps host economies combat concentration on few exports or not, using different indicators of export concentration and outcome. In addition, the study will identify other potential macro-level factors affecting concentration of export in trade. To this end, the project uses secondary data compiled by UNCTAD, CEPII, UN Comtrade, WB, and IMF.
Zásady pro vypracování
Since export concentration entails considerable risk, most countries prioritize expansion of export bases to counter instability of foreign earnings and/or to improve overall trade performance in the global market. Arguably, export concentration highly characterizes preponderance of developing economies: by and large low income, landlocked, and primary commodity dependent nations. Having been restrained by shortage of finance domestically, many of these countries have resorted to attracting foreign capitals, among other Foreign Direct Investment (FDI), to complement internal investment gaps and needs to enhance productivity and output varieties for local use and export. For instance, only 2018, inflows of FDI to Africa increased by 11% (UNCTAD, 2019), though potential explanations around the impacts of FDI in the continent have been contentious. Thus, this study will particularly explore the impacts of FDI on export concentration (export diversification) of developing countries. It addresses question whether FDI (inflows and stocks) helps host economies combat concentration on few exports or not, using different indicators of export concentration and outcome. In addition, the study will identify other potential macro-level factors affecting concentration of export in trade. To this end, the project uses secondary data compiled by UNCTAD, CEPII, UN Comtrade, WB, and IMF.
Seznam doporučené literatury
Amendolagine, V., Boly, A., Coniglio, N. D., Prota, F., & Seric, A. (2013). FDI and Local Linkages in Developing Countries: Evidence from Sub-Saharan Africa. World Development, 50(c), 41-56. Cabral, M. H., & Veiga, P. (2010). Determinants of Export Diversification and Sophistication in Sub-Saharan Africa. In FEUNL working paper series (No. 550). Cadot, O., Carrere, C., & Strauss-Kahn, V. (2013). Trade diversification, income, and growth: What do we know? Journal of Economic Surveys, 27(4), 790-812. Cadot, O., Carrere, C. & Strauss-Kahn, V. (2011). Export Diversification: What?s Behind the Hump? The Review of Economics and Statistics 93 (2), 590-605. Harding, T., & Javorcik, B. S. (2012). Foreign direct investment and export upgrading. Review of Economics and Statistics, 94(4), 964-980. Iwamoto, M., & Nabeshima, K. (2012). Can FDI Promote Export Diversification and Sophistication of Host Countries? Dynamic Panel System GMM Analysis. In IDE Discussion Paper (No. 347). Rodrigo, C., & Nkurunziza, J. D. (2019). Tadesse, B., & K., S. E. (2013). The impact of foreign direct investment on horizontal export diversification: Empirical evidence. Applied Economics, 45(2), 141-159.
Seznam doporučené literatury
Amendolagine, V., Boly, A., Coniglio, N. D., Prota, F., & Seric, A. (2013). FDI and Local Linkages in Developing Countries: Evidence from Sub-Saharan Africa. World Development, 50(c), 41-56. Cabral, M. H., & Veiga, P. (2010). Determinants of Export Diversification and Sophistication in Sub-Saharan Africa. In FEUNL working paper series (No. 550). Cadot, O., Carrere, C., & Strauss-Kahn, V. (2013). Trade diversification, income, and growth: What do we know? Journal of Economic Surveys, 27(4), 790-812. Cadot, O., Carrere, C. & Strauss-Kahn, V. (2011). Export Diversification: What?s Behind the Hump? The Review of Economics and Statistics 93 (2), 590-605. Harding, T., & Javorcik, B. S. (2012). Foreign direct investment and export upgrading. Review of Economics and Statistics, 94(4), 964-980. Iwamoto, M., & Nabeshima, K. (2012). Can FDI Promote Export Diversification and Sophistication of Host Countries? Dynamic Panel System GMM Analysis. In IDE Discussion Paper (No. 347). Rodrigo, C., & Nkurunziza, J. D. (2019). Tadesse, B., & K., S. E. (2013). The impact of foreign direct investment on horizontal export diversification: Empirical evidence. Applied Economics, 45(2), 141-159.
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Student presented the results of the diploma thesis - Impact of FDI on Export Concentration of Developing Economies. Student introduced main topics, objectives and methodology of the thesis. Committee was familiarized with both reviews from supervisor and reviewer. Discussion followed - student focused on those topics and issues - classification of FDI according to the nationality of the investors and the economic sector, institutions quality, natural resources, threshold effects, choice of nominal exchange rate, etc.