nep-tra New Economics Papers
on Transition Economics
Issue of 2011‒03‒19
23 papers chosen by
J. David Brown
Heriot-Watt University

  1. The Wage and Non-wage Costs of Displacement: Evidence from Russia By H. Lehmann; A. Muravyev; T. Razzolini; A. Zaiceva
  2. Political Participation and Entrepreneurial Initial Public Offerings in China By Feng, Xunan; Johansson, Anders C.; Zhang, Tianyu
  3. Individual support for economic and political changes: Evidence from transition countries, 1991-2004 By R. Rovelli; A. Zaiceva
  4. Volatility and correlations for stock markets in the emerging economies By David E Allen; Anna Golab; Robert Powell
  5. China's Foreign Trade in the Perspective of a More Balanced Economic Growth By Guillaume Gaulier; Francoise Lemoine; Deniz Unal
  6. Governance and Enterprise Restructuring in Southeast Europe – gross domestic product and foreign direct investments By Apostolov, Mico
  7. Product Market Regulation and Competition in China By Chalaux, Thomas; Conway, Paul; He, Ping; Herd, Richard; Yu, Jianxun
  8. Export Performance of China's Domestic Firms: the Role of Foreign Export Spillovers By Florian Mayneris; Sandra Poncet
  9. Vulnerability and Bargaining Power in EU-Russia Gas Relations By Edward Hunter Christie; Pavel K. Bev; Volodymyr Golovko
  10. The Effects of Public Listing on the Performance of Banks in China By Bin Liu
  11. Relative Concerns of Rural-to-Urban Migrants in China By Alpaslan Akay; Olivier Bargain; Klaus F Zimmermann
  12. Nowcasting Chinese GDP: Information Content of Economic and Financial Data By Matthew S. Yiu; Kenneth K. Chow
  13. Export Performance and Credit Constraints in China By Joachim Jarreau; Sandra Poncet
  14. Resource Management and Transition in Central Asia, Azerbaijan, and Mongolia By Richard Pomfret
  15. The role of elected and appointed village leaders in the allocation of public resources: Evidence from a low-income region in China By Mu, Ren; Zhang, Xiaobo
  16. Testing for East-West contagion in the European banking sector during the financial crisis By Emidio Cocozza; Paolo Piselli
  17. Drawing the Line: The EU's Political Accession Criteria and the Construction of Membership By Sarah Kahn-Nisser
  18. INSTITUTIONS AND ENTRY: A CROSS-REGIONAL ANALYSIS IN RUSSIA By Bruno, Randolph; Bytchkova, Maria; Estrin, Saul
  19. Returns from income strategies in rural Poland By Jan Fałkowski; Maciej Jakubowski; Paweł Strawiński
  20. Bridging the Gap? Corruption, Knowledge and Foreign Ownership By Nigel L. Driffield; Tomasz Mickiewicz; Sarmistha Pal; Yama Temouri
  21. Analysis of polish business demography using Markov chains By Natalia Nehrebecka
  22. Effects of Price Shocks to Consumer Demand. Estimating the QUAIDS Demand System on Czech Household Budget Survey Data By Kamil Dybczak; Peter Toth; David Vonka
  23. Italian FDI integration with Southeast Europe: country and firm-level evidence By Eleonora Cutrini, Francesca Spigarelli

  1. By: H. Lehmann; A. Muravyev; T. Razzolini; A. Zaiceva
    Abstract: This paper is the first to analyze the costs of job loss in Russia, using unique new data from the Russian Longitudinal Monitoring Survey over the years 2003-2008, including a special supplement on displacement that was initiated by us. We employ fixed effects regression models and propensity score matching techniques in order to establish the causal effect of displacement for displaced individuals. The paper is innovative insofar as we investigate fringe and in-kind benefits and the propensity to have an informal employment relationship as well as a permanent contract as relevant labor market outcomes upon displacement. We also analyze monthly earnings, hourly wages, employment and hours worked, which are traditionally investigated in the literature. Compared to the control group of non-displaced workers (i.e. stayers and quitters), displaced individuals face a significant income loss following displacement, which is mainly due to the reduction in employment and hours worked. This effect is robust to the definition of displacement. The losses seem to be more pronounced and are especially large for older workers with labor market experience and human capital acquired in Soviet times and for workers with primary and secondary education. Workers displaced from state firms experience particularly large relative losses in the short run, while such losses for workers laid off from private firms are more persistent. Turning to the additional non-conventional labor market outcomes, there is a loss in terms of the number of fringe and in-kind benefits for reemployed individuals but not in terms of their value. There is also some evidence of an increased probability of working in informal jobs if displaced. These results point towards the importance of both firm-specific human capital and of obsolete skills obtained under the centrally planned economy as well as to a wider occurrence of job insecurity among displaced workers.
    JEL: J64 J65 P50
    Date: 2011–03
  2. By: Feng, Xunan (Shanghai Jiaotong University); Johansson, Anders C. (China Economic Research Center); Zhang, Tianyu (The Chinese University of Hong Kong)
    Abstract: This paper examines the value of political participation by private entrepreneurs in China. Using a unique sample of all initial public offerings by entrepreneurial firms during 1994-2007 and political participation by the controlling entrepreneurs, we test the hypothesis that firms with entrepreneurs who participate in politics are able to exploit rent-seeking opportunities that normal firms do not have access to. We document that the long-run stock performance after the IPO of firms controlled by entrepreneurs who participate in politics is superior to that of common entrepreneurial firms. Our results also show that political participation has a significant positive effect on change in operating performance and a negative effect on first-day returns. Moreover, we find that economic development and local institutions are important for this value effect. The difference in performance is even larger in regions characterized by more abundant rent-seeking opportunities, indicating that the value effect of political participation likely originates from rent seeking. This finding is consistent with the hypothesis that political participation facilitates entrepreneurs’ rent seeking.
    Keywords: Political participation; Entrepreneurial firms; Corporate governance; Initial public offerings; China
    JEL: G30 G32 G34 P48
    Date: 2011–03–01
  3. By: R. Rovelli; A. Zaiceva
    Abstract: Using a unique dataset for 14 transition economies, we propose a new measure for individual evaluations of transitional reforms, which we use to study, for the first time, the evolution of support for economic and political reforms from 1991 to 2004. We show that support for economic changes has been increasing over time after an initial drop, while support for political reforms has generally been higher. Support attitudes are lower among the old, less skilled, unemployed, poor, and those living in the CIS countries, especially during the 1990s. We also find evidence that transition-related hardship, opinions on the speed of reforms, political preferences and preferences towards redistribution, ideology and social capital matter. Finally, we show that individual preferences for state ownership and the quality of political institutions contribute mostly to explaining the lower levels of support in the CIS countries.
    JEL: O57 A13 P26 P36
    Date: 2011–03
  4. By: David E Allen (School of Accounting Finance & Economics, Edith Cowan University); Anna Golab (School of Accounting Finance & Economics, Edith Cowan University); Robert Powell (School of Accounting Finance & Economics, Edith Cowan University)
    Abstract: This paper examines the European investment implications of the recent European Union (EU) expansion to encompass former Eastern bloc economies. What are the risk and return characteristics of these markets pre- and post-EU? What are the implications for investors within the Euro zone? Should investors diversify outside the Central and Eastern Europe (CEE)? The former Eastern bloc economies constitute emerging markets which typically offer attractive risk-adjusted returns for international investors. In this paper, we explore a number of aspects of this important issue and their implications for CEE based investors, culminating in a Markowitz efficient frontier analysis of these markets pre- and post-EU expansion.
    Keywords: Emerging Markets; European Union; Portfolio investment
    Date: 2010–06
  5. By: Guillaume Gaulier; Francoise Lemoine; Deniz Unal
    Abstract: The global crisis is forcing China’s economy to become less dependent on foreign markets. Manufacturing industry has to adjust to changes in international demand. Foreign affiliates’ processed exports are vulnerable to the slow-down of Western demand, while Chinese exporting firms are better placed to switch to dynamic emerging markets. China’s ordinary imports have risen fast. Asia has enlarged its share in the domestic market, Europe has kept a strong position while North-America has lost ground. China has become the engine of the regional economic growth. Foreign-capital firms have played an increasing part in China’s imports and industrial production. China’s policy towards FDI is at least as important as its exchange rate policy to determine foreign partners’ access to its domestic market.
    Keywords: China; growth model; FDI; ordinary trade; domestic market
    JEL: F2 F1 F15 F23
    Date: 2011–03
  6. By: Apostolov, Mico
    Abstract: This paper is to be concerned with the corporate governance mechanisms’ influence on governance and enterprise restructuring in Southeast Europe (Western Balkans) transition economies: Albania, Bosnia and Herzegovina, Croatia, Macedonia, Montenegro and Serbia. The institutional changes and corporate governance mechanisms in national governance systems are essentially important for the transition process, thus there are specificities of corporate governance mechanisms in transition economies that indicate the progress towards market based economy. Most notable are: the market-based corporate governance mechanisms, management-structure based corporate governance mechanisms, ownership structure, boards of directors, management compensations schemes, that is, management structures and financial structures. Corporate governance mechanisms are seen through governance and enterprise restructuring indicator which has already established link to gross domestic product and foreign direct investments in the literature. The data set is of Southeast European economies, and will be examined the interrelationships between governance and enterprise restructuring, set of policies that influence the governance patterns, gross domestic product and foreign direct investments.
    Keywords: governance, enterprise restructuring, corporate governance, transition, Southeast Europe
    JEL: O11 G38 G32 P31 G30 L33
    Date: 2011
  7. By: Chalaux, Thomas; Conway, Paul; He, Ping; Herd, Richard; Yu, Jianxun
    Abstract: The extent of competition in product markets is an important determinant of economic growth in both developed and developing countries. This paper uses the 2008 vintage of the OECD indicators of product market regulation to assess the extent to which China’s regulatory environment is supportive of competition in markets for goods and services. The results indicate that, although competition is increasingly robust across most markets, the overall level of product market regulation is still restrictive in international comparison. These impediments to competition are likely to constrain economic growth as the Chinese economy continues to develop and becomes more sophisticated. The paper goes on to review various aspects of China’s regulatory framework and suggests a number of policy initiatives that would improve the extent to which competitive market forces are able to operate. Breaking the traditional links between state-owned enterprises and government agencies is an ongoing challenge. Reducing administrative burdens, increasing private sector involvement in network sectors and lowering barriers to foreign direct investment in services would also increase competition and enhance productivity growth going forward. Some of the reforms introduced by the Chinese government over the past two years go in this direction and should therefore help foster growth.
    Date: 2010–12
  8. By: Florian Mayneris; Sandra Poncet
    Abstract: We investigate how the creation of new export linkages (extensive margin of trade) by domestic firms in China is influenced by their proximity to multinational exporters. Using panel data from Chinese customs for 1997-2007, we show that there is evidence that domestic firms’ capacity to start exporting new varieties to new markets positively relates to the export performance of neighboring foreign firms for that same product-country pair. We find that foreign export spillovers are limited to ordinary trade activities. No foreign export spillovers are found for processing trade. More, export spillovers are stronger for sophisticated products indicating that proximity to foreign exporters may help domestic exporters to upgrade their exports. However we observe that foreign export spillovers are weaker when the technology gap between foreign and domestic firms is large, suggesting that upgrading may not occur in locations and sectors where foreign firms have already a strong edge.
    Keywords: Export performance; spillovers
    JEL: F1
    Date: 2010–12
  9. By: Edward Hunter Christie; Pavel K. Bev; Volodymyr Golovko
    Abstract: This report contains three separate papers, each addressing selected issues concerning natural gas policy and security of gas supply in Europe. The over-arching themes are vulnerability (to supply disruptions, to supplier pricing power) and fragmentation; and measures designed to overcome them, namely interconnection and consolidation of bargaining power. The first paper contains a review of some of the economic effects of, and subsequent policy reactions to, the January 2009 cut of Russian gas supplies through the Ukraine Corridor, with a particular focus on Bulgaria and on EU policy. The second paper provides an analysis of the current state of gas relations between Ukraine and the Russian Federation, with a focus on the Ukrainian perspective and on recent political developments in that country. The third paper provides an analysis of the case for consolidating buyer power in line with the concept of an EU Gas Purchasing Agency.
    Keywords: Natural gas, security of supply, supply disruption, interconnector, Russia, Ukraine, Bulgaria, European Union, energy policy, fragmentation, bargaining power, countervailing power, gas purchasing agency
    JEL: C78 L11 Q34 Q48
    Date: 2011–03
  10. By: Bin Liu (CCB International (Holdings) Limited and Hong Kong Institute for Monetary Research)
    Abstract: Chinese banks have been pushing further commercialization, corporate restructuring and public listing in recent years. The ten largest commercial banks in China have all been listed, among which nine went public in the past decade. This paper conducts an empirical investigation on how public listing affects the performance of Chinese banks. Particularly, we examine the pre-listing restructuring effect and the different effects of public listing locations such as Shanghai and Hong Kong, which have not received much attention in the literature. Our sample covers all the 16 listed banks in China and 17 other unlisted banks over the period of 1997-2008. Using a pooled cross-section regression, we compare three modified models built upon Berger et al. (2005) to consider the following three effects: 1) the static governance effect; 2) the selection effect and 3) the dynamic effect. We found that the public listing effect should be modeled as a dynamic process rather than a sudden structural change at a cut-off point, thus it is important to compare the banks' performance during the pre-listing restructuring period with the after-listing period. Moreover, the public listing in Hong Kong is found to have more positive and persistent effects on banks' performance in terms of both profitability and financial safety than the public listing in Mainland China. We also provide some tentative explanations for such different effects on banks' performance, and discuss the implications to both policy makers and market participants.
    Keywords: Public Listing, Cross Listing, Bank Performance, Chinese Banks
    Date: 2011–02
  11. By: Alpaslan Akay (IZA and University of Gothenburg); Olivier Bargain (University College Dublin and IZA); Klaus F Zimmermann (IZA and Bonn University)
    Abstract: How the income of "relevant others" affects well-being has received renewed interest in the recent literature using subjective data. Migrants constitutes a par- ticularly interesting group to study this question: as they changed environment, they are likely to be concerned by several potential reference groups including the people "left behind", other migrants and "natives". We focus here on the huge population of rural-to-urban migrants in China. We exploit a novel dataset that comprises samples of migrants and urban people living in the same cities, as well as rural households mostly surveyed in the provinces where migrants are coming from. After establishing these links, we find that the well-being of migrants is largely af- fected by relative concerns: results point to negative relative concerns toward other migrants and workers of home regions - this status effect is particularly strong for migrants who wish to settle permanently in cities. We find in contrast a positive relative income effect vis-à-vis the urban reference group, interpreted as a signal effect - larger urban incomes indicate higher income prospects for the migrants. A richer pattern is obtained when sorting migrants according to the duration of stay, expectations to return to home countries and characteristics related to family cir- cumstances, work conditions and community ties.
    Keywords: china, relative concerns, well-being
    Date: 2011–01–01
  12. By: Matthew S. Yiu (Hong Kong Monetary Authority); Kenneth K. Chow (Hong Kong Institute for Monetary Research)
    Abstract: This paper applies the factor model proposed by Giannone, Reichlin, and Small (2005) on a large data set to nowcast (i.e. current-quarter forecast) the annual growth rate of China¡¦s quarterly GDP. The data set contains 189 indicator series of several categories, such as prices, industrial production, fixed asset investment, external sector, money market and financial market. This paper also applies Bai and Ng¡¦s criteria (2002) to determine the number of common factors in the factor model. The identified model generates out-of-sample nowcasts for China's GDP with smaller mean squared forecast errors than those of the Random Walk benchmark. Moreover, using the factor model, we find that interest rate data is the single most important block in estimating current-quarter GDP in China. Other important blocks are consumer and retail prices data and fixed asset investment indicators.
    Keywords: Large Data Set, Pseudo Real Time Estimates, Factor Model, Kalman Filtering, Nowcasting, Information Content
    JEL: C33 C53 E32 E37
    Date: 2011–02
  13. By: Joachim Jarreau; Sandra Poncet
    Abstract: We investigate how the export performance of firms in China is influenced by credit constraints. Using panel data from Chinese customs for 1997-2007, we show that credit constraints restrict international trade flows and affect the sectoral composition of firms’ activity. We confirm that credit constraints provide an advantage to Foreign-owned firms and joint ventures over private domestic firms as their export performance is systematically greater in sectors with higher levels of financial vulnerability measured in a variety of ways. We however find that financial sector liberalization has partially reduced these distortions in exports over the period.
    Keywords: Export performance; credit constraints; financial liberalization; FDI
    JEL: F10 F14 F23 F36 G32
    Date: 2010–12
  14. By: Richard Pomfret (Institute for International Economics)
    Abstract: The paper presents a comparative analysis of the resource-rich transition economies of Mongolia and the southern republics of the former Soviet Union. For Uzbekistan and Turkmenistan, the ability to earn revenue from cotton exports allowed them to avoid reform. Oil in Azerbaijan and Kazakhstan was associated with large-scale corruption, but with soaring revenues in the 2000s their institutions evolved and to some extent improved. Kyrgyzstan and Mongolia illustrate the challenges facing small economies with large potential mineral resources, with the former suffering from competition for rents among the elite and the latter from lost opportunities. Overall the countries illustrate that a resource curse is not inevitable among transition economies, but a series of hurdles need to be surmounted to benefit from resource abundance. Neither the similar initial institutions nor those created in the 1990s are immutable.
    Keywords: Oil, Gas, Minerals, Central Asia, Resource Curse
    JEL: Q32 P35 O13
    Date: 2011–03
  15. By: Mu, Ren; Zhang, Xiaobo
    Keywords: appointed leader, election, Public goods,
    Date: 2011
  16. By: Emidio Cocozza (Bank of Italy); Paolo Piselli (Bank of Italy)
    Abstract: Large and growing international financial linkages between East and West have altered the nature of the stability risks faced by European banking systems, increasing susceptibility to contagion. This paper aims to identify potential risks of cross-border contagion using a sample of large Western and Eastern European banks. We assume that contagion risk is associated with extreme co-movements in a market-based measure of bank soundness, controlling for common underlying factors. We also find evidence that contagion risk across European banks heightened significantly during the recent crisis. Contagion among Western European banks with the highest market share in Eastern Europe and from this group to Eastern European banks shows the largest increase in our sample. We find also evidence of contagion spreading from Eastern European banks, but this effect seems to reflect a broader phenomenon of contagion from emerging markets to banks in advanced countries exposed to these markets. Finally, our findings offer only mixed evidence of the existence of a direct ownership channel in the transmission of contagion.
    Keywords: Banking contagion, Distance to default, Testing hypothesis, Logit model
    JEL: C12 G15 G21
    Date: 2011–02
  17. By: Sarah Kahn-Nisser
    Abstract: Abstract: In this paper I seek to explicate the ideas about EU membership embedded in the accession criteria, and in the pre-accession monitoring of Poland, Romania and Turkey. Taking four ideal-type modes of membership as my heuristic gear, I will show that the way the criteria were interpreted and implemented in the ‘progress towards accession’ reports, thickened the criteria and invoked a Civic-Cultural mode of membership for the EU. Two conclusions emerge: First there is a substantial degree of internal logic to the reports. The second conclusion is that the interpretation and reconstruction of the criteria, through the practice of pre-accession monitoring, entails an inherent amplification of the criteria.
    Keywords: Copenhagen criteria; diversity/homogeneity; European identity; normative political theory; enlargement; Poland; Romania; Turkey
    Date: 2011–03–10
  18. By: Bruno, Randolph; Bytchkova, Maria; Estrin, Saul
    Abstract: We analyse a micro-panel data set to investigate the effect of regional institutional environment and economic factors on Russian new firm entry rates across time, industries and regions. The paper builds on novel databases and exploits inter-regional variation in a large number of institutional variables. We find entry rates across industries in Russia are not especially low by international standards and are correlated with entry rates in developed market economies, as well as with institutional environment and firm size. Furthermore, industries that, for scale or technological reasons, are characterised by higher entry rates experience lower entry within regions affected subject to political change. A higher level of democracy enhances entry rates for small sized firms but reduces them for medium or large ones.
    Keywords: democracy; entry rate; institutions
    JEL: L26 P31
    Date: 2011–03
  19. By: Jan Fałkowski (Faculty of Economic Sciences, University of Warsaw); Maciej Jakubowski (Faculty of Economic Sciences, University of Warsaw); Paweł Strawiński (Faculty of Economic Sciences, University of Warsaw)
    Abstract: In Poland, rural households are encouraged to diversify their activities both in and outside the agricultural sector in order to stabilize and improve their income. However, relatively few households appear to do this. This paper addresses this issue, investigating the returns from the income strategies of rural households using propensity score matching methods and extensive data sets for 1998–2008. The results suggest that returns from combining farm and off-farm activities are lower than returns from specialization, namely, concentrating on either farming or off-farm activities. The income difference between farmers and those who combine farming and off-farm activities increased after Poland joined the European Union.
    Keywords: Income diversification, rural areas, propensity score matching, Poland
    JEL: D31 O15 Q12
    Date: 2011
  20. By: Nigel L. Driffield; Tomasz Mickiewicz; Sarmistha Pal; Yama Temouri
    Abstract: We argue that in addition to host corruption per se, as accounted for by the existing literature, an explanation of inter-country variation in FDI needs to account for the distance between the host and home corruption, which we call relative corruption. We use a large matched home-host firm-level panel data-set for 1998-2006 from CEE transition countries. Year-specific selectivity corrected estimates suggest that, ceteris paribus, higher relative ‘grand’ corruption lowers foreign ownership as the returns to investment tends to be lower in more corrupt environment. However, after controlling for the selectivity bias, knowledge- intensive parent firms are found to hold controlling ownership, as the difficulty of successful joint venture looms large in more corrupt environment. Results are robust to alternative specifications.
    Date: 2010–02
  21. By: Natalia Nehrebecka (Faculty of Economic Sciences, University of Warsaw; Department of Statistics, National Bank of Poland)
    Abstract: The article describes the use of the Markov chains methodology for analysis of demographic evolution of Polish enterprises in the years 2003 - 2009. According to the results’ presented in the article, flexibility of Polish companies’ activity in changing economic conditions is stable. The level of migration between sectors is low and limited to several sectors. Expected company life is relatively short (on average, Polish companies exist more than twice shorter than e.g. Belgian companies subject to a study by the National Bank of Belgium). In general, the least “vital” companies may be considered companies from the transport section and then from the building industry, other services and commerce sections. Enterprises that stay on the market the longest are companies from the agricultural and industrial sectors. The mean value of the closeness to extinction indicator amounts to 46% for the whole population. Among all sectors and sections, non-specialised exporters have the highest average age. State-owned companies have significantly higher both the average age and the remaining lifetime than private companies. The bigger is a company the higher is its average age and average remaining lifetime.
    Keywords: Business demography, Markov chains, Transition matrix
    JEL: C81 M13
    Date: 2011
  22. By: Kamil Dybczak; Peter Toth; David Vonka
    Abstract: The purpose of his paper is to describe consumer behavior in the Czech Republic by estimating a demand system in which demand depends on income and prices, but also on other factors such as age, size of the household, and position on the labor market. We combine Household Budget Survey data with information on prices from alternative sources between 2000 and 2008. The main focus of our analysis is to provide estimates of both own-and cross-price and income elasticities, which can be used among other things when analyzing the impact of exogenous price changes on consumer demand. Based on our estimates, the commodity bundles of food, energy, and health and bodycare are necessary goods, as their budget elasticity is positive and below one at the same time. Clothing and shoes, transportation and communication, and education and leisure are luxury goods, with income elasticity above one. The own-price elasticities are negative for all commodity groups, as expected. The cross elasticities seem to be smaller than the own elasticities.We found expenditure on energy and transportation and communication to be the most affected by changes in their own prices. We use our estimates to analyze the impact of regulated price changes on consumer demand and discuss the further potential use of our results.
    Keywords: Consumer behavior, demand systems, price and income elasticities, regulated prices.
    JEL: D12 E21
    Date: 2010–12
  23. By: Eleonora Cutrini, Francesca Spigarelli (University of Macerata)
    Abstract: <div style="text-align: justify;">Southeast European countries have experienced significant economic integration into the world economy since 2000, through international capital flows and especially foreign direct investment (FDI). The present work sheds light on recent trends in Italy-Western Balkans economic integration through FDI. The methodology is based on a country level analysis and on case studies, designed to ascertain Italian firms’ underlying motives for investment in the area. Evidence suggests that the phenomenon is broader than official statistics would indicate: Italian firms often set up subsidiaries without formal or direct capital control. As integration in the area is a recent phenomenon, it is not surprising that the main determinants of Italian investments are cost reductions and new market opportunities, typical of initial stages of penetration in a foreign country. What is interesting in this context is that local entrepreneurs regard efficiency-seeking investments as profitable only if they are connected to market-seeking goals. We find evidence also of localized industrial development stimulated by the entry of Italian firms which is activating subcontracting relationships with existing firms in the host region.</div>
    Keywords: Southeast Europe-Italy integration,case study,foreign direct investment
    JEL: F21 F23 P20
    Date: 2011–03

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