Why Does Fdi Go Where it Goes? New Evidence From the Transition Economies

November 1, 2003

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the importance of agglomeration economies and institutions vis-a-vis initial conditions and factor endowments in explaining the locational choice of foreign investors. Using a unique panel data set for 25 transition economies between 1990 and 1998, we find that the main determinants are institutions, agglomeration, and trade openness. We find important differences between the Eastern European and Baltic countries, on the one hand, and the CIS countries on the other: in the latter group, natural resources and infrastructure matter, while agglomeration matters only for the former group.

Subject: Balance of payments, Econometric analysis, Environment, Estimation techniques, Financial institutions, Foreign direct investment, Labor, Labor costs, Natural resources, Stocks

Keywords: Asia and Pacific, CIS country, country FDI flow, Eastern Europe, Estimation techniques, FDI flow, FDI inflow, FDI motive, FDI stock, foreign direct investment, Labor costs, natural resource, Natural resources, Stocks, transition economies, WP

Pages:
32
Volume:
2003
DOI:
https://doi.org/10.5089/9781451875461.001
Issue:
228
Series:
Working Paper No. 2003/228
Stock No:
WPIEA2282003
ISBN:
9781451875461
ISSN:
1018-5941

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