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Agglomeration economies and location choice: Foreign direct investment in Hungary

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  • F Boudier-Bensebaa

    (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12)

Abstract

Since the beginning of the transition process, Hungary has attracted a significant amount of foreign direct investment (FDI), although this is unevenly distributed among the twenty Hungarian counties. This paper examines the determinants of FDI at a regional level in Hungary and more particularly assesses the importance of agglomeration effects among determinants. A panel model of the location determinants of FDI in Hungary is developed and estimated. Empirical testing suggests that counties with higher labour availability, greater industrial demand and higher manufacturing density attract more FDI. Surprisingly, higher unit labour costs attract FDI. In addition, inter-industrial agglomeration economies and infrastructure availability are found to be important.

Suggested Citation

  • F Boudier-Bensebaa, 2005. "Agglomeration economies and location choice: Foreign direct investment in Hungary," Post-Print hal-00693147, HAL.
    • Handle: RePEc:hal:journl:hal-00693147
    DOI: 10.1111/j.0967-0750.2005.00234.x
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