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Foreign Capital and Economic Development in Hungary

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In economics literature, a number of authors emphasize the need to study both domestic and foreign enterprises in order to properly grasp the effect of foreign direct investment on the local economy. Differences between foreign and domestic enterprises stem from the fact that multinational enterprises operate in a global network extending into many countries, which most certainly exerts influence on all aspects of their production activity. This paper presents a comparative analysis of performance of domestic and three types of foreign enterprises in Hungary. Total-factor pro- ductivity, factor intensity, wages, export intensity, profitability, as well as the effective rate of tax are examined by the combined tools of comparison, regression analysis and Wilcoxon test for data of the whole economy of Hungary. While foreign firms are found to contribute to the revitalization of the economy as far as capital intensity, productivity, export performance and level of wages are concerned, they do not yet seem to produce profitably.

Document Type: Research Article

Publication date: 2001-11-29

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