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FDI inflows to the Transition Economies in Eastern Europe: Magnitude and Determinants

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  • Johnson, Andreas

    ()
    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

Abstract

This paper shows that there are large differences in the volume of FDI that individual European transition economies have attracted and tries to find determinants that can explain this distribution of FDI, using panel data. This paper makes a distinction between ‘traditional’ determinants based on the motive for FDI and ‘transition-specific’ determinants. The empirical analysis contributes to earlier research by separating the transition economies into two groups, CEE and CIS countries. The CEE group consists of countries with a much higher GDP per capita than the CIS group, and this is reflected in the observation that the FDI flows to the CEE are primarily driven by a market-seeking motive while resource-seeking investment can explain the distribution of FDI among the CIS economies. This paper also concludes that transition performance and the choice of primary privatisation method are important in explaining FDI inflows to the transition economies. The analysis only finds weak evidence for efficiency-seeking FDI into the region.

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Bibliographic Info

Paper provided by Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies in its series Working Paper Series in Economics and Institutions of Innovation with number 59.

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Length: 65 pages
Date of creation: 29 Mar 2006
Date of revision:
Handle: RePEc:hhs:cesisp:0059

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Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Phone: +46 8 790 95 63
Web page: http://www.infra.kth.se/cesis/
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Keywords: foreign direct investment; Eastern Europe; transition; privatisation;

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Citations

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Cited by:
  1. Arazmuradov, Annageldy, 2011. "Foreign aid, foreign direct investment and domestic investment nexus in landlocked economies of Central Asia," MPRA Paper 36881, University Library of Munich, Germany, revised 23 Feb 2012.
  2. Bellak, Christian & Leibrecht, Markus & Riedl, Aleksandra, 2008. "Labour costs and FDI flows into Central and Eastern European Countries: A survey of the literature and empirical evidence," Structural Change and Economic Dynamics, Elsevier, vol. 19(1), pages 17-37, March.
  3. Malgorzata Jakubiak & Alina Kudina, 2008. "The Motives and Impediments to FDI in the CIS," CASE Network Studies and Analyses 0370, CASE-Center for Social and Economic Research.
  4. Václav Žďárek, 2009. "Modern methods of production and foreign direct investment," Politická ekonomie, University of Economics, Prague, vol. 2009(4), pages 509-543.
  5. David Dyker & Michael Emerson & Michael Gasiorek & Peter Holmes & Malgorzata Jakubiak & Andre Jungmittag & Vicki Korchagin & Alina Kudina & Evgeny Polyakov & Andrei Roudoi & Gevorg Torosyan, 2008. "Economic Feasibility, General Economic Impact and Implications of a Free Trade Agreement Between the European Union and Armenia," CASE Network Reports 0080, CASE-Center for Social and Economic Research.

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