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Agglomeration Economies and the Location of Foreign Direct Investment: Empirical Evidence from Romania

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  • Christian Hilber
  • Ioan Voicu

Abstract

Hilber C. A. L. and Voicu I. Agglomeration economies and the location of foreign direct investment: empirical evidence from Romania, Regional Studies. The large inflow of foreign direct investment into Romania, after the revolution in 1989, is exploited to study the determinants of foreign direct investment location in transition economies. Using a conditional logit set-up and choice-specific fixed-effects, it is found that external economies from service agglomeration are the main determinant of foreign direct investment location. An increase in service employment density by 10.0% makes the average Romanian county 11.9% more likely to attract a foreign investor. Industry-specific foreign and domestic agglomeration economies and labour conflicts also impact foreign direct investment location. A comparison with findings of other studies suggests that service agglomeration economies may be geographically quite localized. [image omitted] Hilber C. A. L. et Voicu I. Les economies d'agglomeration et la localisation de l'Investissement direct etranger: des preuves empiriques provenant de la Roumanie, Regional Studies. Cet article approfondit le flux important d'Ide a destination de la Roumanie, suite a la revolution de 1989, afin d'etudier les determinants de la localisation de l'Ide dans les economies de transition. A partir d'un modele du type logit conditionnel et des effets specifiques aux choix, il s'avere que des economies externes dues a l'agglomeration des services sont les principaux determinants de la localisation de l'Ide. Une hausse de la densite de l'emploi tertiaire de 10 pourcent rend le comte roumanien moyen 11.9 pourcent plus susceptible d'attirer un investisseur etranger. Des economies d'agglomeration interieures et exterieures, specifiques a l'industrie, et les conflits du travail influent aussi sur la localisation de l'Ide. Une comparaison avec les resultats des etudes anterieures laisse supposer que les economies d'agglomeration du secteur tertiaire pourraient s'averer assez localisees du point de vue geographique. Economies d'agglomeration Investissement direct etranger Economies de transition Hilber C. A. L. und Voicu I. Agglomerationsvorteile und der Standort von auslandischen Direktinvestitionen: empirische Evidenz aus Rumanien, Regional Studies. Wir nutzen den starken Zustrom von auslandischen Direktinvestitionen nach Rumanien in der Zeit nach der Revolution von 1989 zur Analyse der Standorts-Determinanten von auslandischen Direktinvestitionen in Reformlandern. Mit Hilfe von konditionalen Logit-Modellen und von standortspezifischen fixen Effekten, zeigen wir auf, dass externe Effekte von dienstleistungsspezifischen Agglomerationsvorteilen die wichtigste Determinante der Standortwahl darstellen. Eine 10-prozentige Zunahme der Beschaftigungsdichte im Dienstleistungssektor in einem durchschnittlichen rumanischen Bezirk erhoht die Wahrscheinlichkeit, dass ein auslandischer Investor angezogen wird, um 11.9 Prozent. Auch branchenspezifische auslandische und einheimische Agglomerationsvorteile sowie Arbeitskonflikte beeinflussen den Standort von auslandischen Direktinvestitionen. Ein Vergleich mit den Ergebnissen anderer Studien lasst darauf schliessen, dass der Einfluss von dienstleistungsspezifischen Agglomerationsvorteilen auf die Standortwahl in geografischer Hinsicht recht lokalisiert ist. Agglomerationsvorteile Auslandische Direktinvestitionen Reformlander Hilber C. A. L. y Voicu I. Economias de aglomeracion y ubicacion de la Inversion Directa Extranjera: evidencia empirica de Rumania, Regional Studies. Analizamos la entrada de Inversion Directa Extranjera (IDE) en Rumania tras la revolucion de 1989 con la finalidad de estudiar los determinantes de la ubicacion de IDE en las economias de transicion. Con ayuda de una estructura condicional de un modelo logit y efectos fijos especificos de opcion, observamos que las economias externas de una aglomeracion de servicios son el principal factor para determinar la ubicacion de IDE. Un aumento de un 10 por ciento en la densidad del empleo de servicios incrementa en un 11,9 por ciento la probabilidad de atraer un inversor extranjero en un condado medio rumano. Las economias de aglomeracion especificas para la industria tanto nacionales como extranjeras y los conflictos laborales tambien influyen en la ubicacion de la IDE. En comparacion con los resultados de otros estudios se observa que las economias de aglomeracion de servicios pueden estar geograficamente bien localizadas. Economias de aglomeracion Inversion directa extranjera Economias de transicion

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Regional Studies.

Volume (Year): 44 (2010)
Issue (Month): 3 ()
Pages: 355-371

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Handle: RePEc:taf:regstd:v:44:y:2010:i:3:p:355-371

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Keywords: Agglomeration economies; Foreign direct investment; Transition economies;

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References

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Citations

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Cited by:
  1. Andrea Gauselmann & Philipp Marek, 2011. "Regional Determinants of MNE's Location Choice in Transition Economies," WIFO Working Papers 412, WIFO.
  2. Vivien Procher, 2009. "Agglomeration Effects and the Location of Foreign Direct Investment – Evidence from French First-time Movers," Ruhr Economic Papers 0100, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Jacob A. Jordaan, 2012. "Agglomeration and the location choice of foreign direct investment: new evidence from manufacturing FDI in Mexico," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 27(1), pages 61-97.
  4. JUDE, Cristina & LEVIEUGE, Gregory, 2013. "Growth effect of FDI in developing economies: The role of institutional quality," MPRA Paper 49321, University Library of Munich, Germany.
  5. Kandogan, Yener, 2012. "Regional foreign direct investment potential of the states within the US," Journal of Economics and Business, Elsevier, vol. 64(4), pages 306-322.
  6. Ksenia Gonchar & Philipp Marek, 2013. "Natural-resource or market-seeking FDI in Russia? An empirical study of locational factors affecting the regional distribution of FDI entries," HSE Working papers WP BRP 26/EC/2013, National Research University Higher School of Economics.
  7. Mano, Yukichi & Suzuki, Aya, 2013. "Measuring Agglomeration Economies: The Case of the Ethiopian Cut Flower Industry," Discussion Papers 2013-04, Graduate School of Economics, Hitotsubashi University.
  8. Cristina Jude & Grégory Levieuge, 2014. "Growth Effect of FDI in Developing Economies: the Role of Institutional Quality," Working Papers halshs-01014404, HAL.
  9. Andrea Gauselmann & Philipp Marek, 2012. "Regional determinants of MNE’s location choice in post-transition economies," Empirica, Springer, vol. 39(4), pages 487-511, November.
  10. Chen, George Shih-Ku, 2009. "Agglomeration economies and the location of Taiwanese investment in China," MPRA Paper 13896, University Library of Munich, Germany.
  11. Andrzej CieŚlik, 2013. "Determinants of the Location of Foreign Firms in P olish Regions: Does Firm Size Matter?," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 104(2), pages 175-193, 04.
  12. K. Gonchar & Philipp Marek, 2013. "Natural-resource or Market-seeking FDI in Russia? An Empirical Study of Locational Factors Affecting the Regional Distribution of FDI Entries," IWH Discussion Papers 3, Halle Institute for Economic Research.
  13. Davide Castellani & Giulio Giangaspero & Antonello Zanfei, 2013. "Heterogeneity and distance. Some propositions on how differences across regions, firms and functions affect the role of distance in FDI location decisions," Working Papers 1308, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2013.
  14. Raluca Georgiana POPESCU, 2011. "The Regional Climate of Foreign Direct Investments in Romania," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 8, pages 321-330, December.
  15. Jonathan Jones & Colin Wren, 2011. "On the Relative Importance of Agglomeration Economies in the Location of FDI Across British Regions," SERC Discussion Papers 0089, Spatial Economics Research Centre, LSE.

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