Navigationsweiche Anfang

Navigationsweiche Ende

Sprache wählen

Aktuelles

  • New Discussion Paper (Advance Version March 30th) Macroeconomic and Health Care Aspects of the Coronavirus Epidemic: EU, US and Global Perspectives
    Summary: The novel coronavirus (COVID-19) epidemic represents a major challenge for the world... [mehr]
  • Makroökonomische und gesundheitspolitische Aspekte der Coronavirus-Epidemie: EU, USA und globale Perspektiven
    Zusammenfassung: Die neuartige CoronaviRus (COVID-19)-Epidemie stellt eine große Herausforderung... [mehr]
  • Macroeconomic and Health Care Aspects of the Coronavirus Epidemic: EU, US and Global Perspectives
    Summary: The novel coronavirus (COVID-19) epidemic represents a major challenge for the world... [mehr]
  • Prof. Paul JJ Welfens in UC Berkeley (Feb, 2020) | The Global Trump
    Prof. Paul JJ Welfens presented his book The Global Trump: Structural US Populism and Economic... [mehr]
  • EIIW Policy Brief
    Verhandlungspositionen UK und EU nach dem BREXIT-Tag 31. Januar 2020: Britische... [mehr]
zum Archiv ->

Jungmittag, A.; Welfens, P.J.J.: EU-US Trade Post-Trump Perspectives: TTIP Aspects Related to Foreign Direct Investment and Innovation

Jungmittag, A.; Welfens, P.J.J.: EU-US Trade Post-Trump Perspectives: TTIP Aspects Related to Foreign Direct Investment and Innovation

 

JEL classification: F14, F43, O30, O47, O52

Key words: Knowledge production function, Innovation, FDI, TTIP, Empirical Analysis, EU

 

Summary

The international economic debate on the Transatlantic Trade and Investment Partnership (TTIP) has focused mainly on trade induced real income gains while the FDI related and innovation induced benefits have been largely neglected, although the EU and the US are leading FDI host countries and FDI source countries. Moreover, from a theoretical perspective a knowledge production function has to be considered in order to analyze FDI and innovation dynamics – and this can then be linked to output and economic growth, respectively. It is argued that such a Schumpeterian approach for an open economy is needed to understand deep integration dynamics while the standard CGE model used by Francois et al (2013) leads to an underestimation of deep integration projects such as TTIP. The panel data estimation of knowledge production functions for 20 EU countries between 2002-2012 shows clear empirical evidence that a rise of the number of researchers and of the FDI stock-GDP ratio (or related variables) will raise patent applications. Additionally, a higher per capita income – that could reflect trade related real income gains in the context of TTIP – also contributes to new knowledge and a fortiori to higher GDP. Time series data analysis for Germany indicates additionally that FDI induced higher innovation dynamics will raise output - combining trade benefits and FDI/innovation related real income gains plus transatlantic macroeconomic interdependency effects a real income gain of nearly 2% should be expected for Germany (and the EU). As the Trump Administration is focusing on bilateralism, the US is essentially renouncing a considerable output increase and opportunities to improve its current account; instead the Trump Administration has adopted a policy of protectionism which is likely to undermine trade dynamics and economic growth. In the long run, transatlantic trade perspectives could improve.

 

Download the paper