Márta Bisztray - research

The effect of FDI on local suppliers: Evidence from Audi in Hungary, IE CERS-HAS MT-DP - 2016/22

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In 1993 Audi opened a new plant in Hungary. This paper examines the long-term effects of this large foreign direct investment on local firms operating in supplier industries. I use firmlevel panel data with long time series. Using the method of triple difference-in-differences I compare outcomes of firms in supplier and control industries, close and far from the Audi plant, before and after the entry. My main findings are: (1) after the Audi entry the average annual growth rate of local firms increased by 3 percentage points for sales and 2 percentage points for employment. The effect is visible only five years after the entry of Audi. I find no positive effect on productivity. (2) Firms with foreign owners account for all the positive effect on sales and employment, suggesting a foreign-to-foreign complementarity in investments. Firms with higher productivity gained more. Consequently, the low initial productivity of domestic firms may explain the lack of an effect in this group. (3) New entrants in the supplier industry locating close to Audi are larger and grow faster, suggesting that Audi also had an effect on the extensive margin.

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The effect of foreign-owned large plant closures on nearby firms, IE CERS-HAS MT-DP - 2016/23

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I estimate the impact of foreign-owned large plant closures on local firms. I identify 41 such events in Hungary and assign comparable control cities with foreign-owned large plants operating in the same industry and not closing. I use a firm-level panel database of Hungarian firms between 1992 and 2012. I do a difference-in-differences estimation comparing outcomes of firms in the treated and control areas, before and after the plant closure. I find that after the foreign-owned large plant closures sales of nearby firms decreased by 6 percentage points and employment decreased by 3 percentage points on average. Firms operating in local services were hurt even more, suggesting that reduced local purchasing power due to the layoffs is a significant channel of the local plant closure effect. Firms operating in the supplier industry of the closing plant also decreased employment more than average, suggesting that input-output linkages play an important role in the propagation of negative shocks. In contrast, firms in the industry of the closing plant increased their employment, suggesting that they could benefit from the increased local labor supply. I also find that low-productivity firms were hurt more by the plant closures than high-productivity firms.

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Do friends follow each other? : FDI network effects in Central Europe (with Gábor Békés), IE CERS-HAS MT-DP  - 2017/19

updated version as of 2019 May (with Gábor Békés and Péter Harasztosi)

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A great deal of multinationals receive a bundle of hidden or cash subsidizes upon investing in a foreign country. Policymakers often argue that a subsidy today will help locate friends of the investor later on. Using extensive data on FDI investments, we analyze such patterns. In particular, we investigate if co-location is more frequent among connected firms such as members of business groups as well as firms sharing similar background. Focusing on investments into Central and Eastern European countries we find evidence of co-location pattern of connected firms.

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