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2481. Drivers of FDI in the EU: Regulatory distance and revealed technological advantage

Author:
Chiara Castelli, Ronald B. Davies, Javier Flórez Mendoza, and Mahdi Ghodsi
Publication Date:
06-2025
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This study examines the interplay between trade policy, in particular non-tariff measures (NTMs), and revealed technological comparative advantage (RTA) at the NUTS 2 level as drivers of foreign direct investment (FDI) over time. Combining data from the Orbis database (Bureau Van Dijk), the NTMs database (WTO I-TIP) and the European Patent Office (EPO PATStat), we construct a comprehensive panel database of European firms owned by foreign-owned EU and non-EU firms. This database includes financial information for both parent companies and their subsidiaries as well as detailed country- and sector-specific trade barriers from the perspective of both the home and host economies. Furthermore, this database allows us to compute tailored RTA variables reflecting firm-specific technological interests proxied by firms’ patent production across technology classes. Using a Poisson pseudo-maximum likelihood (PPML) estimator, our analysis reveals a heterogeneous impact of NTMs and RTAs on FDI investment in the EU regions. Specifically, while increasing the regulatory distance (RD) of technical barriers to trade (TBTs) and sanitary-and-phytosanitary-standard (SPS) measures hampers FDI investment from extra-EU companies, the results on tariffs support the regulatory jumping motive. Furthermore, local technological capabilities significantly support FDI, especially when RTAs reflect the technological interests of the foreign-owned subsidiary, while the effect is reversed when accounting for the innovation portfolio of the parent company.
Topic:
International Trade and Finance, Foreign Direct Investment, European Union, Regulation, and Tariffs
Political Geography:
Europe

2482. FDI and innovation dynamics: The role of foreign corporate groups and technological pathways in domestic green innovation

Author:
Mahdi Ghodsi, Francesca Micocci, and Armando Rungi
Publication Date:
06-2025
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper investigates how the presence of foreign direct investment (FDI) contributes to domestic innovation with a focus on green technologies in the European regions between 2013 and 2018. Using a rich dataset combining patent data, firm-level data and FDI proxies, we identify a clear pattern: when foreign investors are technologically sophisticated, domestic firms in the regions where they invested show a higher propensity for patenting. The patenting activity by the parent companies of multinational enterprises (MNEs) and their corporate perimeter plays a more crucial role than local foreign subsidiaries. Furthermore, we find that the technological focus of MNEs – green vs. non-green – shapes the direction of these spill-overs. Notably, we provide novel evidence of linkages between the green patenting activity of MNE parents located abroad and the green innovation of domestic firms in the European Union, mediated through foreign subsidiaries operating in close proximity. Policy efforts aiming to foster green innovation should therefore prioritise attracting foreign investors with strong innovation records in environmentally sustainable technologies.
Topic:
International Trade and Finance, Science and Technology, Foreign Direct Investment, European Union, Multinational Corporations, and Innovation
Political Geography:
Europe

2483. Digitalisation of jobs and gender-age segregation in digital tasks: Cross-country evidence based on ESJS2 data

Author:
Sebastian Leitner and Stella Sophie Zilian
Publication Date:
12-2025
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper addresses the disproportional effects of digitalisation across age by investigating: (i) within-job age segregation in tasks by digital intensity; (ii) within-job age disparities in digital upskilling; (iii) age inequalities in wage returns to digital job tasks; and (iv) the role of gender in this age segregation and inequalities. The analysis is based on data of Cedefop’s second wave of the European Skills and Jobs Survey (ESJS2), conducted in 2021. First results of the analysis show that even when controlling for occupation-industry job pairs apart from using other explanatory variables, age segregation and gender gaps are prevalent in the case of digital skill intensity of tasks performed in the jobs of employees, though not in the case of digital upskilling via training measures. Applying the same appropriate controls, we also find that higher within-job digital skill intensity is associated with higher hourly wages. Gender wage gaps are sizable across all skill intensity categories in addition to widening in older age groups.
Topic:
European Union, Inequality, Digitalization, Skills, Gender, and Jobs
Political Geography:
Europe, Norway, and Iceland

2484. Robots, shoring patterns, and employment: What are the linkages?

Author:
Hylke Dijkstra and Konstantin M. Wacker
Publication Date:
07-2025
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
In this paper, we analyse how robotisation is associated with industry output and its production inputs. We therefore link data on employment, robotisation and input-output relations for 15 manufacturing industries across 35 countries. Analysing the decade prior to 2018, we show that robotising industries experience increases in output and approximately equiproportional increases in value added, employment, domestic intermediate inputs and foreign intermediate inputs. Owing to this equiproportionality, robotising industries do not see a significant change in their domestic input ratios (value added plus domestic intermediates relative to total inputs). Our empirical results document that robotising industries are thriving in terms of output generation, that those thriving industries are internationally well integrated, and that their output expansion is associated with employment generation. Industries that use an increasing share of domestic production inputs generally experience less favourable output and employment developments, although this association is imprecisely estimated.
Topic:
Labor Issues, Employment, Global Value Chains, Robotics, Production, and Reshoring
Political Geography:
Global Focus

2485. Revisiting the distance elasticity and investment motives in the FDI gravity model: Aggregate vs. sector-level evidence

Author:
Nicola Rebmann and Konstantin M. Wacker
Publication Date:
09-2025
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper re-examines foreign direct investment motives in the ‘FDI gravity’ model (Kleinert and Toubal, 2010), focusing on the role of distance. More precisely, we investigate whether aggregate and pooled gravity models for FDI obscure relevant heterogeneities across sectors. This is possible through the novel MREID dataset, which provides us with FDI data at the 2-digit NAICS level for 184 countries over the period 2010 to 2020. Our results reveal that aggregate and pooled models mask significant sector heterogeneities in two aspects: (i) in the importance of horizontal versus vertical FDI motives, and (ii) in the distance elasticity. The latter reflects that distance potentially captures more complex sector-specific components than are captured in the current gravity model for FDI.
Topic:
International Trade and Finance, Foreign Direct Investment, Investment, and Gravity Model
Political Geography:
Global Focus

2486. Innovation interactions: Multinational spillovers and local absorptive capacity

Author:
Ronald B. Davies, Mahdi Ghodsi, and Francesca Guadagno
Publication Date:
06-2025
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
The hope that multinational firms will improve local employment and productivity is a driving force behind policy efforts to attract investment. Such spillovers are often motivated by technological spillovers from foreign to domestic firms. We address this possibility by using the patenting activity of foreign multinationals in Europe as a measure of affiliate activity alongside more traditional proxies. We find that local firms’ employment and labour productivity is higher when FDI activity increases, particularly when those multinationals are upstream of locals. Furthermore, this effect is particularly significant among domestic patenting firms. Thus, it seems that the benefits of inbound investment are greatest for local innovators who are exposed to inbound innovating foreigners.
Topic:
International Trade and Finance, Foreign Direct Investment, European Union, Patents, and Spillovers
Political Geography:
Europe

2487. Assessing the interrelationship between atypical work and net migration in the EU: Evidence from 17 Countries (2004–2019)

Author:
Laurène Thil and Stella Sophie Zilian
Publication Date:
06-2025
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper studies how atypical work, alongside other labour market conditions, affect intra-EU migration and vice versa in 17 EU countries from 2004 to 2019. Relative increases of part-time and self-employment shares in sending countries increase net migration, whereas relative increases in short fixed-term shares reduce net migration. Net migration shocks persistently reduce part-time share differentials, initially reduce self-employment share differentials and increase short fixed-term share differentials. Atypical work explains about one-fifth of net migration fluctuations five and ten years after a shock. The findings highlight the trade-off between internal (employment flexibility) and external (migration) labour market adjustments.
Topic:
Migration, European Union, Employment, Mobility, and Labor Market
Political Geography:
Europe

2488. Defending Without Provoking: The United States and the Philippines in the South China Sea

Author:
Sarang Shidore
Publication Date:
02-2025
Content Type:
Policy Brief
Institution:
Quincy Institute for Responsible Statecraft
Abstract:
The South China Sea has long been the subject of territorial and maritime disputes between Beijing, Manila, and other claimants. Since late 2022, escalating confrontations between Philippine and Chinese forces over tiny maritime features such as Second Thomas Shoal have posed a serious and growing risk of a military confrontation, which could in turn entangle the United States. Washington can avoid this worst-case scenario by charting a pragmatic approach and upholding its alliance commitment to the Philippines while avoiding military actions that would needlessly provoke China. The data in this brief show a dramatic increase of maritime incidents starting in the third quarter of 2023. China and the Philippines are disputing control over, among other things, what are little more than specks in the ocean, most located a hundred miles or more from the mainland of either country. However, maritime rights and jurisdiction are significant issues, and there is no question that Beijing’s behavior in the South China Sea has been provocative and coercive. Moreover, an international tribunal has ruled overwhelmingly in favor of the Philippines in the dispute, decisively rejecting China’s “historic” claims around the “nine/ten dash line.” The U.S. relationship with the Philippines represents one of the United States’ oldest treaty alliances in the Global South and is important to America’s Pacific strategy. But the South China Sea conflict does not represent a threat of conquest of the Philippine mainland. Washington should recognize that defending maritime rights and tiny land features in waters half a world away is not a vital U.S. national interest and could become a serious liability should it open the door to a high-intensity conflict with China. An honest assessment of U.S. interests dictates a strategy of restraint in the South China Sea. While recognizing Manila’s agency and continuing to strengthen Philippine capacities, Washington should also encourage Manila to engage constructively with Beijing to prevent escalation. Crucially, U.S. policymakers must also avoid raising the risk of conflict by drawing the Philippines into taking a more aggressive stance on Taiwan. Washington can help preserve and uphold international law in the South China Sea while reducing the risk of war between the United States and China by taking the following steps: Do not pull the U.S.–Philippines alliance into the Taiwan theater. Washington should not add to its nine existing military sites in the Philippines and, ideally, should disband one or more of the new sites located in northern Luzon (closer to Taiwan) in exchange for Chinese concessions. Do not give the U.S. Navy or Coast Guard a frontal role in countering Chinese intrusions in the South China Sea; enable Manila to take the lead instead. Do not seek to draw the military of U.S. allies (particularly extra-regional ones) into South China Sea disputes, in order to avoid needlessly heightening Chinese perceptions of bloc-formation and armed encirclement. Enhance diplomatic support to Manila for its legitimate claims under international law. Provide aid, capabilities, and intelligence for modernizing the Philippine Coast Guard and Navy and enhancing maritime domain awareness. Build on the early success of the July 2024 Philippines–China understanding on Second Thomas Shoal by emphasizing preventive diplomacy and crisis management to stabilize the maritime dispute and reduce the chances of a conflict spiral.
Topic:
Foreign Policy, Diplomacy, Territorial Disputes, Armed Forces, Maritime, and Strategic Planning
Political Geography:
Asia, Philippines, North America, United States of America, and South China Sea

2489. Big Ideas and Big Money: Think Tank Funding in America

Author:
Ben Freeman and Nick Cleveland-Stout
Publication Date:
01-2025
Content Type:
Policy Brief
Institution:
Quincy Institute for Responsible Statecraft
Abstract:
This brief provides a detailed analysis of a first-of-its-kind, publicly available repository of U.S. think tank funding — www.thinktankfundingtracker.org. The repository tracks funding from foreign governments, the U.S. government, and Pentagon contractors to the top 50 think tanks in the United States over the past five years. It serves as a vital research guide for anyone wishing to learn more about the funding sources of prominent U.S. think tanks. The repository gives a five-point transparency score to each of the top 50 think tanks in the U.S., a scale created by the authors based on five binary questions. Based on this criteria, nine of the top 50 think tanks (18 percent) are fully transparent, while 23 think tanks (46 percent) are partially transparent. Most concerning, the remaining 18 think tanks (36 percent) are “dark money” think tanks, entirely opaque in their funding without revealing donors. In the past five years, foreign governments and foreign government-owned entities donated more than $110 million to the top 50 think tanks in the United States. The most generous donor countries were the United Arab Emirates, the United Kingdom, and Qatar, which contributed $16.7 million, $15.5 million, and $9.1 million to U.S. think tanks, respectively. The Atlantic Council, Brookings Institution, and German Marshall Fund received the most money from foreign governments since 2019: $20.8 million, $17.1 million, and $16.1 million, respectively. In that same period, the top 100 defense companies have contributed more than $34.7 million to the top 50 think tanks. The top donors include Northrop Grumman, Lockheed Martin, and Mitsubishi, which provided $5.6 million, $2.6 million, and $2.1 million, respectively, to the tracked think tanks between 2019 and 2023. The Atlantic Council, Center for a New American Security, and the Center for Strategic and International Studies were the top recipients of Pentagon contractor money: $10.2 million, $6.6 million, and $4.1 million, respectively. The U.S. government has directly given at least $1.49 billion to American think tanks since 2019. However, the vast majority of this funding — $1.4 billion — goes to the Rand Corporation, which works directly for the U.S. government. While think tanks exist to produce independent analysis, the prevalence of special interest funding raises questions of intellectual freedom, self-censorship, and perspective filtering. This is compounded by instances in which individual researchers simultaneously hold positions at a think tank and a given foreign government or corporation, a clear potential conflict of interest. Moving forward, this brief contains a set of recommendations for various actors: For media: Adopt a professional standard to report any conflicts of interest with sources discussing U.S. foreign policy. For Congress: Pass legislation requiring all nonprofit organizations that seek to influence public policy to publicly disclose all of their corporate, U.S. government, and foreign government donors above $10,000, and improve the conflict of interest disclosure requirements for congressional witnesses. For the Department of Justice: Provide clearer guidelines surrounding what think tanks not registered under the Foreign Agents Registration Act can do on behalf of their foreign donors. For think tanks: End pay-to-play research and proactively move toward identifying conflicts of interest.
Topic:
Foreign Policy, Domestic Politics, Think Tanks, Donors, Funding, and Foreign Influence
Political Geography:
North America and United States of America

2490. European Hedging as a Diplomatic Opportunity for the United States

Author:
Naman Karl-Thomas Habtom
Publication Date:
04-2025
Content Type:
Policy Brief
Institution:
Quincy Institute for Responsible Statecraft
Abstract:
With the onset of multipolarity in the world and growing disagreement between the U.S. and Europe, the U.S. should expect a declining foreign policy alignment with Europe. Rather than bemoan this development, the U.S. should recognize it as a strategic opportunity. Selective hedging by European countries — reducing their dependency on the United States and cultivating stronger relations with other major powers — would facilitate a diplomacy-led, restraint-based U.S. foreign policy and help the U.S. navigate a multipolar world order. For years, Europe has stood as a de facto vassal of the United States, a continent dependent on American military might and comprising countries largely lacking foreign policy independence. Such self-subordination has had negative consequences for Europe and the United States alike. It has weakened Europe’s overall global standing, which in turn means that the U.S. has been able to draw less advantage from its European alliance. This has unintentionally reduced U.S. diplomatic heft in engaging with adversaries. But a considerable U.S.–European schism has recently emerged. The Trump administration’s decided break from the transatlantic status quo has engendered strong disagreements over Ukraine, European security policy more broadly, and international trade. With the combined weakening of political, military, and economic links across the Atlantic, Europe is more likely to hedge moving forward. Strategic hedging — a posture already adopted by many countries in the Global South — would allow European countries to pursue an independent foreign policy, bolstering their international relevance. This reorientation would be diplomatically advantageous to the United States, as hedgers in Europe could serve as friendly interlocutors for American engagement with rival nations. European hedging could provide a conduit for constructive U.S. diplomacy, while discouraging zero-sum thinking and the disintegration of the global order into hostile blocs. The U.S. must recognize that a vassalized European continent is both unsustainable and antithetical to a restrained foreign policy vision. While retaining friendly ties with European countries, the United States should now actively promote selective hedging, paving the way for long-term European independence and peaceful multipolarity.
Topic:
Foreign Policy, Diplomacy, Donald Trump, and Multipolarity
Political Geography:
Europe, North America, and United States of America