Related trade variety, foreign-domestic spillovers and regional employment in Hungary

Abstract

This paper investigates the role of extra-regional capabilities in regional economic development in a Central and Eastern European context. This is done by analysing the association between the related variety of manufacturing import and export of domestic- and foreign-owned firms on the one hand, and regional employment in manufacturing export on the other. By means of a panel regression framework applied to the Hungarian microregions between 2000 and 2011, we find that domestic firms, in particular, benefit from the related variety of export activities in the regions, while import related to existing export activities is beneficial amongst both foreign and domestic firms. Furthermore, bridging the technological gap between foreign companies and the host economy requires stronger technological relatedness, unless domestic firms have experience in importing.