Determinants of FDI inflows into the Baltic countries: Empirical evidence from a gravity model
AbstractThe article analyzes FDI inflows into Baltic countries using a gravity approach. The results of the empirical estimation allow us to explain how difference in corporate taxation between countries, geographical and cultural distance, institutions such as regulations and the size of the economy as well as its economic development affect FDI inflows into the Baltic countries. The influence of corporate taxation on FDI flows, expressed as corporate tax rate differences between investor and host countries is statistically significant. Larger geographical distance between the countries reduces FDI flows, and institutional variables such as the economic freedom index have significant impact and affect positively FDI into the Baltics. Finally, the size of economy, measured by GDP, impacts positively the FDI flows into Baltic countries.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2012-060.
Date of creation: 02 Nov 2012
Date of revision:
gravity model; foreign direct investments; corporate tax; Baltic countries;
Find related papers by JEL classification:
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
- F2 - International Economics - - International Factor Movements and International Business
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
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