Economic nationalists, regional investment aid, and the stability of FDI-led growth in East Central Europe

Medve-Bálint, Gergő ORCID: and Éltető, Andrea ORCID: (2024) Economic nationalists, regional investment aid, and the stability of FDI-led growth in East Central Europe. JOURNAL OF EUROPEAN PUBLIC POLICY . DOI

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Although economic nationalist governments in East Central Europe (ECE) have strongly challenged FDI-dependence, FDI-led growth has remained stable across the region. The political economy literature explains this puzzle with enduring business-state elite interactions and the disciplining role of the EU. Instead, we show that the EU’s regional investment aid rules, which provide central governments in relatively backward member states with considerable policy space, serve as the main policy tool for reinforcing FDI-dependence. Using a unique dataset on regional investment aid granted between 2004 and 2022 in the Visegrád countries (V4), we show that each government, regardless of its ideological background, granted the vast majority of this type of aid to foreign firms. In addition, contrary to their political rhetoric, economic nationalist governments in Hungary and Poland outperformed their non-nationalist counterparts in granting aid to foreign firms. This suggests an instrumental use of this transnationally rooted policy opportunity: as their European political isolation grew, economic nationalists increasingly resorted to the promotion of foreign firms because the continued inflow of foreign capital has a legitimising effect both at home and abroad.

Item Type:Article
Uncontrolled Keywords:autocratic hedging, dependent market economy, East–West divide, economic nationalism, EU state aid regime, regional investment aid
Divisions:Institute of Social and Political Sciences
Subjects:Regional economy
International relations
Funders:János Bolyai Research Scholarship of the Hungarian Academy of Sciences, National Research, Development and Innovation Fund
Projects:NKFIH FK 135342
ID Code:9674
Deposited By: MTMT SWORD
Deposited On:19 Feb 2024 07:57
Last Modified:19 Feb 2024 07:57

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