Regional Integration, Foreign Direct Investment and Specialization -a case study of Hungary and the European Union

Abstract: This paper deals with the effects of regional integration on the flows of FDI in the case of north-south integration. The focus of the study is Hungary’s integration with the European Union. It is shown that EU-integration has had positive effects on the inflows of FDI in Hungary due to strong environmental change and Hungary’s locational advantages. The main part of the FDI can be found in the electric, electronic and automotive industries and it is therefore also explored whether Hungary has specialized in these goods. Calculations of comparative advantage show vertical specialization in the majority of the goods belonging to these industries. The result is also supported by the availability of factors used intensively in the production of the goods.