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Spatial econometric analysis of determinants and strategies of FDI in Russian regions in pre- and post-1998 financial crisis periods

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  • Ledyaeva, Svetlana

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    (BOFIT)

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    Abstract

    Using a spatial autoregressive model of cross-sectional and panel data, we study the determinants and dominant strategies of FDI inflows into Russia before and after the 1998 financial crisis. The important determinants of FDI inflows into Russian regions since transition began appear to be market size, the presence of large cities and sea ports, oil and gas availability, and political and legislative risks. Since 1998, it appears the importance of big cities, the Sakhalin region, oil and gas resources and legislation risk has increased, while the importance of political risk and port availability has decreased. Our results also reveal a shift from horizontal FDI strategy to a regional trade-platform FDI strategy. While theory anticipates combined vertical and horizontal motives for regional trade-platform strategies, the lack of evidence of a vertical motive in the Russian case suggests import substitution presently plays a significant role in regional trade-platform FDI. Using a multiple spatial lags approach, we show that neighbouring regions with ports have emerged post-crisis as competitors for FDI and identify agglomeration effects in FDI between adjacent regions with and without ports during the period 1999-2002.

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    Bibliographic Info

    Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 15/2007.

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    Length: 61 pages
    Date of creation: 24 Jul 2007
    Date of revision:
    Handle: RePEc:hhs:bofitp:2007_015

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    Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
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    Keywords: Foreign Direct Investment; Russian regions; FDI strategy; spatial autoregressive model;

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    1. Ronald B. Davies, 2003. "Fragmentation of Headquarter Services and FDI," University of Oregon Economics Department Working Papers, University of Oregon Economics Department 2003-25, University of Oregon Economics Department, revised 01 Sep 2003.
    2. Jim Markusen & Caroline Ekholm, Rikard Forslid, 2005. "Export-Platform Foreign Direct Investment," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp050, IIIS.
    3. Badi H. Baltagi & Peter Egger & Michael Pfaffermayr, 2005. "Estimating Models of Complex FDI: Are There Third-Country Effects?," Center for Policy Research Working Papers, Center for Policy Research, Maxwell School, Syracuse University 73, Center for Policy Research, Maxwell School, Syracuse University.
    4. Ichiro Iwasaki & Keiko Suganuma, 2005. "Regional Distribution of Foreign Direct Investment in Russia," Post-Communist Economies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 17(2), pages 153-172.
    5. Cletus C. Coughlin & Eran Segev, 1999. "Foreign direct investment in China: a spatial econometric study," Working Papers 1999-001, Federal Reserve Bank of St. Louis.
    6. Chakrabarti, Avik, 2003. "A theory of the spatial distribution of foreign direct investment," International Review of Economics & Finance, Elsevier, Elsevier, vol. 12(2), pages 149-169.
    7. Ndikumana, Leonce, 2000. "Financial Determinants of Domestic Investment in Sub-Saharan Africa: Evidence from Panel Data," World Development, Elsevier, vol. 28(2), pages 381-400, February.
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    Cited by:
    1. Csaba Weiner, 2011. "Foreign Direct Investments in Russia and the Hungarian-Based Investors," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 104-115.
    2. Coleman, Stephen, 2010. "The spatial diffusion of social conformity: the case of voting participation," MPRA Paper 23057, University Library of Munich, Germany.
    3. Gladysheva, Anna & Ratnikova, Tatiana, 2013. "The determinants of the distribution of foreign direct investment in Russian food industry companies," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 29(1), pages 97-116.

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