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Further publications: Bettina Meinhart (2 hits)

This article examines the impact of membership in the European Union (EU) on foreign direct investments (FDI). In contrast to previous studies, the overall effect of EU membership is disaggregated by countries that joined the EU before 2004 (EU 15) and those that joined after 2004 (Central and Eastern European – CEE). This disaggregation is motivated by differences between the two groups in terms of their historical background, GDP levels and motives for FDI. Furthermore, the effects of EU membership are estimated at the country level. Using a structural FDI gravity model and applying recent advances in the gravity estimation literature, it is shown that membership of the EU has a substantial positive impact on both inward and outward FDI stocks. In particular, there is considerable heterogeneity in the impact of EU membership, with EU 15 countries experiencing mainly an increase in inward FDI, while CEE countries experience a surge in outward FDI.
Numerous negative external effects are associated with the transport of goods. Due to the lack of internalising them in transport prices, too many goods are transported over too long distances. Several approaches are taken to reduce external costs, such as bans, regulations, taxes, levies and tradable permits. In some areas, however, such interventions are impractical to implement or do not exist at all. At the EU level external costs associated with the transport of goods are only partially reflected in transport prices. Applying a quantitative model, the analysis investigates a scenario of a coordinated EU approach to internalise external transport costs of extra-EU trade activities. The results reveal a positive effect on real GDP and employment in the EU, provided that the revenues from these trade surcharges are recycled back into the economy. Policy options to achieve that transport prices reflect social costs are identified in the analysis.