This thesis analyses the effect of FDI induced technology transfer and spillover on economic growth in the CEE countries and the Baltic States. We develop a framework were FDI and R&D are seen as sources of technological progress (A). Transition economies, due to the need to catch up quickly with more advanced economies, rely on FDI as a major channel through which they can tap the needed technology. Whether or not technology spills over to the entire economy depends on the ability of the countries to diffuse the advanced technology transferred by FDI. We test using panel data analysis, if FDI alone can spur growth or whether the FDI induced technology spillover effect is enhanced by the level of R&D. Empirical evidence is found that FDI and R&D as an interaction term have helped the CEE countries and the Baltic States to accelerate growth by modernizing the economy through an upgrading process.

<p>This thesis analyses the effect of FDI induced technology transfer and spillover on economic growth in the CEE countries and the Baltic States. We develop a framework were FDI and R&D are seen as sources of technological progress (A). Transition economies, due to the need to catch up quickly with more advanced economies, rely on FDI as a major channel through which they can tap the needed technology.</p><p>Whether or not technology spills over to the entire economy depends on the ability of the countries to diffuse the advanced technology transferred by FDI. We test using panel data analysis, if FDI alone can spur growth or whether the FDI induced technology spillover effect is enhanced by the level of R&D.</p><p>Empirical evidence is found that FDI and R&D as an interaction term have helped the CEE countries and the Baltic States to accelerate growth by modernizing the economy through an upgrading process.</p>

This thesis consists of four self-contained papers on job turnover, productivity and state- local finance. Paper [I] deals with the determinants of the rate of job turnover defined as the change in distribution of employment between and within industries in Swedish manufacturing. The rate of inter-industry job turnover is driven by the dispersion of profit changes among industries. Shifts in international competitiveness among industries seem to play a central role in the explanation of this pattern. The rate of intra-industry job turnover has been higher in industries with many small plants, low profit margins and high import penetration. Paper [II] analyzes the impact of openness on total factor productivity (TFP) growth. Using Swedish industry level data the results show that economically integrated industries tend to be more engaged in research and development (R&amp;D) and have more entry and exit activity than other industries. The domestic R&amp;D intensity does not contribute to the TFP growth rate. Instead, the results imply that openness to international markets, which helps facilitate technology spillovers, has a significant impact on the growth rate. There is also some evidence suggesting that producers exiting the market are less productive, implying that such exits will increase the average productivity of the industry concerned. The purpose of Paper [III] is to design and implement a test of whether the external effect from tax base sharing among local and regional governments is internalized via the intergovernmental transfer system. The test is based on the observation that if the external effect is internalized, an increase in the income tax rate at one level of government will induce the other level to reduce its income tax rate by the corresponding amount, leaving the effective tax rate unchanged. By using panel data for the Swedish local and regional public sectors, we estimate the reaction function for the local income tax rate. The results imply that an increase in the regional income tax rate induces the municipalities in the region to decrease their income tax rates. In addition, we are able to reject the null hypothesis that the external effect from tax base sharing is internalized. Paper [IV] concerns risk-sharing, in terms of how the central government smooths personal income among municipalities via the tax and transfer systems. Using Swedish panel data, the results show that the national tax and transfer systems mitigate an adverse shock to income of one krona so that disposable income falls by 67 öre, on average. However, there are large differences across regions, where the effect on disposable income varies between 32 and 78 öre in the krona. / digitalisering@umu

This dissertation collects four essays on banks, firms and real effects of bank lending. Owing to the appliance of different econometric methods on several datasets, insights in the behav-ior of and the impacts from financial markets and market participants are generated. In the first chapter, our results uncover a so far undocumented ability of the interbank market to distinguish between banks of different quality in times of aggregate distress. We show empirical evidence that during the 2007 financial crisis the inability of some banks to roll over their interbank debt was not due to a failure of the interbank market per se but rather to bank-specific shocks affecting banks’ capital, liquidity and credit quality as well as revised bank-level risk perceptions. Relationship banking is not capable of containing these frictions, as hard information seems to dominate soft information. In detail, we explore determinants of the formation and resilience of interbank lending relationships by analyzing an extensive da-taset comprising over 1.9 million interbank relationships of more than 3,500 German banks between 2000 and 2012. The second chapter examines the relationship between central bank funding and credit risk-taking. Employing bank-firm-level data from the German credit registry during 2009:Q1-2014:Q4, we find that banks borrowing from the central bank rebalance their portfolios to-wards ex-ante riskier firms. We further establish that this effect is driven by the ECB’s maturi-ty extensions and that the risk-taking sensitivity of banks borrowing from the ECB is inde-pendent of idiosyncratic bank characteristics. Finally, we show that these shifts in bank lend-ing are associated with an increase in firm-level investment and employment, but also with a deterioration of bank balance sheet quality in the following year. Once we analyze the relationship of banks as lenders vis-à-vis banks as borrowers and banks as lenders vis-à-vis non-financial companies as borrowers, we enlarge the understand-ing of non-financial companies not only in terms of being simply borrowers, respectively sub-jects exhibiting of credit risks. Instead, we try to understand the inner working of those com-panies more generally and analyze their quality not only in terms of a bank’s risk assessment but also in terms of the overall market assessment. However, this in turn can generate infor-mation useable to assess the quality of a bank’s credit portfolio in dimensions that so far are not taken into account by the current regulatory framework. Moreover, a better understanding of banks and non-banks beyond the standard lens of the banking and corporate finance litera-ture might promote new scopes for future research connecting those discrete subjects. In this regard, the third chapter analyzes the dependence of price reactions to corporate insider trad-ing on several measures of corporate governance quality. Our results strongly support the view that first, higher corporate governance levels seem to prevent or discourage insiders from engaging in insider trading as means of opportunistic rent extraction. Second, results confirm the notion of buy and sell trades not being just two sides of the same coin. That is, a higher level of corporate governance leads to a better pre-event information environment which results in less positive abnormal returns after insider buy trades as the incremental posi-tive information revealed by the trade is smaller. In contrast, sell trades in firms with better corporate governance are perceived to convey more valuable and most importantly negative information to the capital market so that prices adjust more for companies with better govern-ance schemes. Third, we show that institutional ownership even on an aggregate level is a sufficient measure to proxy a company’s corporate governance level. Hence, as information on companies’ bylaws and on investors’ investment dedication and type for example are scarce, respectively associated with higher costs because one has to gather that information one can refrain from that and instead proxy the governance level with the aggregate measure of institutional ownership. The latter result is important for carrying out future analyses merg-ing and extending the findings of the first two chapters. Last, the fourth chapter abstracts from borrowers as subjects of credit risk, as well, and most importantly extends the analysis of banks, firms and their interactions effecting each other by a macroeconomic perspective of the real effects of bank lending. That is, as capital flows and real estate are pro-cyclical, and real estate has a substantial weight in economies’ income and wealth Chapter 4 studies the role of real estate markets in the transmission of bank flow shocks to output growth across German cities. In this regard, real sector firms play a central role in the transmission mechanism we uncover. More specifically, the empirical analysis relies on a new and unique matched data set at the city level and the bank-firm level. To measure bank flow shocks, we show that changes in sovereign spreads of Southern Eu-ropean countries (the so-called PIGS spread) can predict German cross-border bank flows. To achieve identification by geographic variation, in addition to a traditional supply-side varia-ble, we use a novel instrument that exploits a policy assigning refugee immigrants to munici-palities on an exogenous basis. We find that output growth responds more to bank flow shocks in cities that are more exposed to tightness in local real estate markets. We estimate that, during the 2009-2014 period, for every 100-basis point increase in the PIGS spread, the most exposed cities grow 15-2 basis points more than the least exposed ones. Moreover, the differential response of commercial property prices can explain most of this growth differen-tial. When we unpack the transmission mechanism by using matched bank-firm-level data on credit, employment, capital expenditure and TFP, we find that firm real estate collateral as measured by tangible fixed assets plays a critical role. In particular, bank flow shocks in-crease the credit supply to firms and sectors with more real estate collateral. Higher credit supply then leads firms to hire and invest more, without evidence of capital misallocation.