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The endogeneity problem and fdi in transition: evidence from the privatized glass sector

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  • Elisa Galeotti
  • Eva Ryšavá

Abstract

This paper analyses the crucial factors determining the foreign direct investment (FDI) going to the privatized glass sector in the Czech Republic. In our research we felt that there was a scant evidence in Central and Eastern Europe of the determinants of foreign direct investments (FDI) at the micro level and we were aware of the endogeneity issue of FDI. The aim of this paper is to fill these gaps. The choice of the glass sector allows for an analysis of a firm's micro characteristics that attract foreign direct investors in an industrial sector, while reducing the impact of macroeconomic factors in their choice. Our econometrical analysis, using original panel data from 1990 to 2006, gives strong evidence that foreign direct investors in the glass sector in the Czech Republic have chosen larger and more profitable firms that were intensively restructured and privatized at the beginning of the transition. Our results support the relevance of the endogeneity issue in the choice of foreign direct investors in transition countries.

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Bibliographic Info

Article provided by University of Economics, Prague in its journal Prague Economic Papers.

Volume (Year): 2008 (2008)
Issue (Month): 4 ()
Pages: 319-339

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Handle: RePEc:prg:jnlpep:v:2008:y:2008:i:4:id:335:p:319-339

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Related research

Keywords: performance; panel data; glass industry; foreign investors; endogeneity; Czech Republic;

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References

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Citations

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Cited by:
  1. Václav Žďárek, 2009. "Modern methods of production and foreign direct investment," Politická ekonomie, University of Economics, Prague, University of Economics, Prague, vol. 2009(4), pages 509-543.
  2. Elisa Galeotti, 2009. "Do Domestic Firms Benefit from Geographical Proximity with Foreign Investors? Evidence from the Privatization of the Czech Glass Industry," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(1), pages 026-047, March.
  3. Karel Janda & Eva Michalíková & Věra Potácelová, 2010. "Gravity and Fiscal Models of Government Support of Export Credit in the Czech Republic," Politická ekonomie, University of Economics, Prague, University of Economics, Prague, vol. 2010(3), pages 305-325.

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