Foreign Direct Investment and Central Europe's Reintegration into Global Economy

FDI have dramatically impacted trade patterns of Central Europe and mode of integrating into global markets. Thanks to FDI, CEEC-10 have moved from inter-industry trade, characteristic of their central planning era, to intra-industry or intra-product trade, as network trade is often referred to. FDI have helped close the initial gap between endowments in high skilled labor and export baskets driven by unskilled labor intensive products. They have also been instrumental in incorporating several Central European economies into a new global division of labor based on production fragmentation and organized around large multinational corporations’ supply networks (‘MNC-driven’ network trade). Countries with larger stock of FDI in manufacturing have also been more involved in network trade.