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Factor Endowments, Economic Integration, Round-Tripping, and Inward FDI: Evidence from the Baltic Economies

Author

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  • Andrzej Cieślik

    (Department of Macroeconomics and International Trade Theory, Faculty of Economic Sciences, University of Warsaw, ul. Długa 44/50, 00-241 Warszawa, Poland)

  • Oleg Gurshev

    (Department of Macroeconomics and International Trade Theory, Faculty of Economic Sciences, University of Warsaw, ul. Długa 44/50, 00-241 Warszawa, Poland)

Abstract

This paper studies the location choice of foreign multinational firms in the Baltic economies of Estonia, Latvia, and Lithuania using a knowledge-and-physical capital model across 2004–2017. We used the Bayesian model averaging estimation method to investigate a set of possible factors that drive inward FDI. Our analysis demonstrates that factor endowments play a dominant role in driving vertical foreign direct investment, while external market barriers generate “tariff-jumping” FDI. Our analysis quantifies the effects of round-trip FDI, European integration, and external bilateral free trade agreements vis-à-vis inward FDI in the Baltics.

Suggested Citation

  • Andrzej Cieślik & Oleg Gurshev, 2021. "Factor Endowments, Economic Integration, Round-Tripping, and Inward FDI: Evidence from the Baltic Economies," JRFM, MDPI, vol. 14(8), pages 1-26, July.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:8:p:348-:d:604442
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    References listed on IDEAS

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