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A Nested logit approach to modelling the location of foreign direct investment in the Central and Eastern European Countries

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  • Rasciute, Simona
  • Pentecost, Eric J.

Abstract

This paper applies the Nested logit model to a three-level dataset in order to examine the factors explaining foreign investment location decisions into 13 Central and Eastern European Countries (CEECs) over an eleven-year period between 1997 and 2007. The three-level dataset allows firm, industry and country factors to simultaneously determine the firm-level investment location decisions. The Nested logit model partially relaxes the assumption of the independence from irrelevant alternatives and tests if national boundaries affect the choice of investment location of multinational enterprises in the CEECs. In addition, the Heteroskedastic Extreme Value model is used to help identify an appropriate nesting structure. Empirical results show that the responsiveness of the firms' decision regarding where to locate capital in the CEECs to country-level variables differs both across sectors and across firms of different sizes and profitability.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 27 (2010)
Issue (Month): 1 (January)
Pages: 32-39

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Handle: RePEc:eee:ecmode:v:27:y:2010:i:1:p:32-39

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Nested logit model Heteroskedastic Extreme Value model Foreign direct investment Multi-level data;

References

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  1. Becker, Sasha O & Ekholm, Karolina & Jackle, Robert & Muendler, Marc-Andreas, 2004. "Location Choices and Employment Decisions: A Comparison of German and Swedish Multinationals," University of California at San Diego, Economics Working Paper Series qt2fq490pd, Department of Economics, UC San Diego.
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  14. Salvador Barrios & Sophia Dimelis & Helen Louri & Eric Strobl, 2004. "Efficiency spillovers from foreign direct investment in the EU periphery: A comparative study of Greece, Ireland, and Spain," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 140(4), pages 688-705, December.
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Citations

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Cited by:
  1. Bartolj, Tjaša & Polanec, Sašo, 2012. "College major choice and ability: Why is general ability not enough?," Economics of Education Review, Elsevier, vol. 31(6), pages 996-1016.
  2. Valerija Botrić, 2013. "Determinants of Intra-industry Trade between Western Balkans and EU-15: Evidence from Bilateral Data," International Journal of Economic Sciences and Applied Research (IJESAR), Technological Educational Institute (TEI) of Kavala, Greece, vol. 6(2), pages 7-23, September.
  3. Sánchez Navarro, Dennis, 2013. "Análisis de elasticidades en el mercado automotor colombiano (2009 - 2011) mediante un modelo logit anidado
    [Analysis Of Elasticity In Colombian Automotive Market (2009 - 2011) Through A Nested Lo
    ," MPRA Paper 46043, University Library of Munich, Germany.

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