The Location of Foreign Direct Investment in the Central and Eastern European Countries: A Nested Logit and Multilevel Data Approach
AbstractThis paper generalizes the existing empirical literature on the determinants of the location of FDI, using a nested logit (NL) model and a novel three-level dataset to examine the factors explaining 1,108 foreign investment location decisions into 13 Central and Eastern European countries (CEECs) between 1997 and 2007. The NL model relaxes the multinomial logit model assumption of independence of identically distributed error terms and allows for testing if national boundaries affect the investment location choices of MNEs in the CEECs. In contrast to the existing empirical literature on the investment location choices, the Heteroskedastic Extreme Value model is used as a tool to reveal an appropriate nesting structure. The highly significant empirical results, based on a general underlying economic model of imperfect competition, show that the responsiveness of FDI in the CEECs to country-level variables differs both across sectors and across firms of different sizes and profitability. Hence the results of previous studies that used only country-level data or only industry- and firm-level data may be misleading.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2007_29.
Date of creation: Dec 2007
Date of revision: Dec 2007
Contact details of provider:
Postal: Loughborough, Leicestershire, LE11 3TU
Phone: +44 (0) 1509 222701
Fax: +44 (0) 1509 223910
Web page: http://www.lboro.ac.uk/departments/sbe/research/economics/index.html
More information through EDIRC
Nested logit model; foreign direct investment; multi-level data; heteroskedastic extreme value model;
Find related papers by JEL classification:
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-26 (All new papers)
- NEP-DCM-2008-01-26 (Discrete Choice Models)
- NEP-EEC-2008-01-26 (European Economics)
- NEP-TRA-2008-01-26 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- K.H. Midelfart & H.G. Overman & S.J. Redding & A.J. Venables, 2000. "The location of European industry," European Economy - Economic Papers 142, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
- Shang-Jin Wei, 2000.
"How Taxing is Corruption on International Investors?,"
The Review of Economics and Statistics,
MIT Press, vol. 82(1), pages 1-11, February.
- Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," William Davidson Institute Working Papers Series 63, William Davidson Institute at the University of Michigan.
- Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," NBER Working Papers 6030, National Bureau of Economic Research, Inc.
- repec:fth:eeccco:142 is not listed on IDEAS
- Bevan, Alan A. & Estrin, Saul, 2004. "The determinants of foreign direct investment into European transition economies," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 775-787, December.
- Carstensen, Kai & Toubal, Farid, 2004.
"Foreign direct investment in Central and Eastern European countries: A dynamic panel analysis,"
Munich Reprints in Economics
19965, University of Munich, Department of Economics.
- Carstensen, Kai & Toubal, Farid, 2004. "Foreign direct investment in Central and Eastern European countries: a dynamic panel analysis," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 3-22, March.
- Kai Carstensen & Farid Toubal, 2003. "Foreign Direct Investment in Central and Eastern European Countries: A Dynamic Panel Analysis," Kiel Working Papers 1143, Kiel Institute for the World Economy.
- Train,Kenneth E., 2009.
"Discrete Choice Methods with Simulation,"
Cambridge University Press, number 9780521747387, October.
- Hensher, David A. & Greene, William H., 2002. "Specification and estimation of the nested logit model: alternative normalisations," Transportation Research Part B: Methodological, Elsevier, vol. 36(1), pages 1-17, January.
- Kimberly A. Clausing & Cosmina L. Dorobantu, 2005. "Re-entering Europe: Does European Union candidacy boost foreign direct investment?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 77-103, 01.
- Claudia M. Buch & Jörn Kleinert & Alexander Lipponer & Farid Toubal, 2005. "Determinants and effects of foreign direct investment: evidence from German firm-level data," Economic Policy, CEPR & CES & MSH, vol. 20(41), pages 52-110, 01.
- Paul Krugman, 1990.
"Increasing Returns and Economic Geography,"
NBER Working Papers
3275, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Huw Edwards).
If references are entirely missing, you can add them using this form.