Climbing the Rungs of the Quality Ladder: FDI and Domestic Exporters in Romania

By Matej Bajgar and Beata Javorcik


A new EBRD Working Paper (number 235)

This paper argues that inflows of foreign direct investment can facilitate export upgrading in host
countries. Using customs data merged with firm-level information for 2005-2011, it shows a positive
relationship between the quality of products exported by Romanian firms and the presence of
multinational enterprises (MNEs) in the upstream (input-supplying) industries. Export quality is also
positively related to MNE presence in the downstream (input-sourcing) industries and the same
industry, but these relationships are less robust. These conclusions hold both when the product
quality is proxied with unit values and when it is estimated following the approach of Khandelwal et
al. (2013).

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