FDI and regional development
Foreign direct investment (FDI) can play an important role in raising a region’s technological level, its productive efficiency and its ability to compete internationally. Foreign firms bring new technologies, new knowledge, and new management skills, and local firms can learn from this. However, fears have also been raised that foreign competitors crowd out local firms, and a net positive effect on the regional economy can not be taken for granted. On behalf of the European Commission, Copenhagen Economics has identified and measured externalities arising from FDI at the regional level. We show that productivity is increased through both vertical and horizontal spillovers. In other words the whole value chain as well as competitors are positively affected by an inflow of FDI. We also confirm that over time labour demand is unaffected by inflow of FDI.  However, both job creation and job destruction occur in industries with many foreign firms over the short run. But overall, FDI is a positive stimulus on regional employment. In a second part of the study, Copenhagen Economics has investigated what drives FDI flows. We find clear evidence that FDI is attracted by regional policy. Thus, investments in educating the regional work force, increasing the level of spending on R&D, supporting strong regional clusters, and raising the penetration of new technology and infrastructure all increase the likelihood of receiving FDI significantly. The report can be downloaded here For further information you are welcome to contact Mr. Martin Hvidt Thelle
Impacts of Differentiated VAT Rates
Having agreed in February 2006 to prolong the experiment with reduced VAT rates on labour intensive services, the ECOFIN Council invited the Commission to provide a report on the impact of reduced rates on job creation, economic growth and the internal market. The report was to be built upon a study carried out by an independent consultancy. Copenhagen Economics was selected to carry out the study. At a press conference on Thursday, July 5, 2007, Commissioner Laszlo Kovacs unravelled the results of our study to the public in the form of a Communication, which calls for a broad debate to raise the awareness across the member states of the costs and merits of selective VAT reductions they choose to implement. Based upon new empirical evidence, model simulations, theory and country experiences, the study concludes:
  • There are strong general arguments for having just one VAT rate per member state. A single rate can improve economic efficiency, reduce compliance costs and smooth the functioning of the internal market.
  • However, we agree that reduced rates in selective cases may have merit. It can (1) increase efficiency by increasing productivity or by reducing structural unemployment and/or (2) enhance equity by improving the income distribution or by making particular products more accessible to the entire population.
  • We largely conclude that in the areas where efficiency or equity can be improved in a cost effective manner by way of reduced rates, adverse internal market effects such as distorted competition across borders are for the most part insignificant. In contrast, we define a number of other areas where reduced rates are detrimental to the internal market without having strong positive impacts on national objectives. 
  • Finally, we underline that targeted direct budget subsidies can often achieve better results at lower costs than reduced VAT rates, which should be factored into discussions on the use of reduced VAT rates.
Throughout the study, we propose some practical guidelines and tests that can be used to translate these conclusions into actual policy making including the balance between national and community objectives. Read the Commission's communication here Read the full report here For further information please contact Helge Sigurd Næss-Schmidt or Christian Jervelund
The 2007 Øresund index now available

Erhvervslivets Øresundsindeks er i 2007 målt til 68 på en skala fra 0 til 100. En værdi på 100 svarer til det niveau for aktivitet på tværs af Øresund som man kunne forvente i en situation uden barrierer mellem Sjælland og Skåne. Det giver en stigning i forhold til sidste år på fire indekspoint. Øresundsindekset er primært drevet af udvikling på arbejdsmarkedet i år. Den danske højkonjunktur slår igennem på både de danske og de svenske indikatorer for arbejdsmarkedet. Henholdsvis positivt og negativt. Resultatet bliver at det danske landindeks for første gang i Øresundsindeksets historie overstiger det svenske indeks. Det er også første gang Danmark kan anses som den side der driver udviklingen af Øresundsintegrationen. Vi ser desuden at det svenske pendlingstal overstiger benchmarket og dermed bliver den anden indikator der opnår niveauet for fuld integration på 100. Det pressede danske arbejdsmarked samt det høje antal flytninger fra Hovedstaden til Stormalmø giver også stigninger i bil- og togtrafikken. På handel & samarbejde er det især virksomhedernes ens konjunkturvurderinger på hver side af sundet der giver grund til begejstring. Copenhagen Economics har opgjort Erhvervslivets Øresundsindeks for Øresund Industri & Handelskammare hvert år siden 2001. Formålet med Erhvervslivets Øresundsindeks er at måle integrationen i Øresundsregionen ud fra erhvervslivets perspektiv. Læs rapporten her For yderligere oplysninger kontakt Partner Martin Hvidt Thelle

New appointments at Copenhagen Economics

Petter Berg is appointed Senior Economist per 1st May, 2007

In two years, Petter Berg has made Copenhagen Economics a well established player on the Swedish market for competition economics advice. Petter has created good relationships with both customers and business partners in Sweden.


Please see here for further details.


Mikkel Egede Birkeland joins Copenhagen Economics as Business Manager Mikkel Egede Birkeland (35) joins the company as business manager to lead the area of Regions and Trade.

Mikkel joins us from a position as senior economist at TDC and has previously worked for COWI, and Orange in Paris.


Please see here for further details.

Linda Bisp (27)  joins Copenhagen Economics as Accounts Assistant

Linda joins the adminstration and support team to further strengthen the internal operating processes. Linda joins us from a position in Storstrøms Amt. Please see here for further details.

Gains from free trade with Korea

The European Commission's General Directorate for Trade (DG Trade) commissioned Copenhagen Economics and Professor Joseph F. Francois to analyse the economics aspects of a potential free trade agreement between the EU and the republic of South Korea.


Korea is a growing economy, roughly of the same size as Spain. GDP per capita is also approaching Spanish levels. We found that both Korea and the EU can look forward to substantial welfare gains if agreement is reached on free trade in agriculture, manufacturing and services. For South Korea the gains will materialise through better market access to the European market, including advanced electronics and motor vehicles. Korea will also gain from opening its services sectors to European service providers, including maritime services and shipping. These are essential inputs for the continuation of Korean growth, and European service providers can competitively supply this if current barriers are dismantled.


The European Commission has now obtained a mandate to negotiate with Korea. For further information please see the report here  


Or consult the Commission's webpage on trade with Korea here


For further information please contact Martin Hvidt Thelle