Abstract
This chapter examines the relationships between foreign direct investment (FDI) flows into Ukraine, and imports and exports to and from the country. Theoretically, FDI and international trade can be substitutes or complements. Empirically, the paper shows that FDI from the European Union (EU) into primary industries is mostly export-oriented and thus complements trade, whereas that into secondary, manufacturing industries tends to substitute for trade. The paper argues that primary-industry FDI from the EU is motivated by Ukraine’s comparatively abundant and cheap natural resources, whereas secondary-industry FDI is motivated on the cost side by Ukraine’s low wage labour and on the revenue side by its large and relatively untapped domestic market. Secondary-industry FDI thus has the potential for import-substitution, although tests of this hypothesis at aggregate levels were inconclusive.
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Mankovska, N., Dean, J.W. (2002). The Relationship between Foreign Direct Investment and Trade Flows in a Transition Economy: The Case of Ukraine. In: von Cramon-Taubadel, S., Akimova, I. (eds) Fostering Sustainable Growth in Ukraine. Physica, Heidelberg. https://doi.org/10.1007/978-3-642-57464-1_19
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DOI: https://doi.org/10.1007/978-3-642-57464-1_19
Publisher Name: Physica, Heidelberg
Print ISBN: 978-3-7908-1464-4
Online ISBN: 978-3-642-57464-1
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