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Agglomeration Economies and the Location of Foreign Direct Investment: Empirical Evidence from Romania

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  • Hilber, Christian A. L.
  • Voicu, Ioan

Abstract

Relatively little is known about the determinants of FDI location in transition economies. We exploit the large inflow of FDI into Romania, after the revolution in 1989, to study this question. Using a conditional logit setup, we find that external economies from service agglomeration are the main determinant of FDI-location. An increase in service employment density by 10 percent makes the average Romanian county 11.9 percent more likely to attract a foreign investor. Industry specific foreign and domestic agglomeration economies and labor conflicts also impact FDI-location. Our findings imply that results are sensitive to the inclusion of locational fixed effects.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5137.

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Date of creation: 30 Sep 2007
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Handle: RePEc:pra:mprapa:5137

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Keywords: Agglomeration economies; foreign direct investment; transition economies;

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Cited by:
  1. Davide Castellani & Giulio Giangaspero & Antonello Zanfei, 2013. "Heterogeneity and distance. Some propositions on how differences across regions, firms and functions affect the role of distance in FDI location decisions," Working Papers 1308, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2013.
  2. K. Gonchar & Philipp Marek, 2013. "Natural-resource or Market-seeking FDI in Russia? An Empirical Study of Locational Factors Affecting the Regional Distribution of FDI Entries," IWH Discussion Papers 3, Halle Institute for Economic Research.
  3. Jacob A. Jordaan, 2012. "Agglomeration and the location choice of foreign direct investment: new evidence from manufacturing FDI in Mexico," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 27(1), pages 61-97.
  4. Jonathan Jones & Colin Wren, 2011. "On the Relative Importance of Agglomeration Economies in the Location of FDI Across British Regions," SERC Discussion Papers 0089, Spatial Economics Research Centre, LSE.
  5. Andrea Gauselmann & Philipp Marek, 2012. "Regional determinants of MNE’s location choice in post-transition economies," Empirica, Springer, vol. 39(4), pages 487-511, November.
  6. Ksenia Gonchar & Philipp Marek, 2013. "Natural-resource or market-seeking FDI in Russia? An empirical study of locational factors affecting the regional distribution of FDI entries," HSE Working papers WP BRP 26/EC/2013, National Research University Higher School of Economics.
  7. Cristina Jude & Grégory Levieuge, 2014. "Growth Effect of FDI in Developing Economies: the Role of Institutional Quality," Working Papers halshs-01014404, HAL.
  8. Vivien Procher, 2009. "Agglomeration Effects and the Location of Foreign Direct Investment – Evidence from French First-time Movers," Ruhr Economic Papers 0100, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  9. Andrzej CieŚlik, 2013. "Determinants of the Location of Foreign Firms in P olish Regions: Does Firm Size Matter?," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 104(2), pages 175-193, 04.
  10. Chen, George Shih-Ku, 2009. "Agglomeration economies and the location of Taiwanese investment in China," MPRA Paper 13896, University Library of Munich, Germany.
  11. Kandogan, Yener, 2012. "Regional foreign direct investment potential of the states within the US," Journal of Economics and Business, Elsevier, vol. 64(4), pages 306-322.
  12. JUDE, Cristina & LEVIEUGE, Gregory, 2013. "Growth effect of FDI in developing economies: The role of institutional quality," MPRA Paper 49321, University Library of Munich, Germany.
  13. Raluca Georgiana POPESCU, 2011. "The Regional Climate of Foreign Direct Investments in Romania," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 8, pages 321-330, December.
  14. Mano, Yukichi & Suzuki, Aya, 2013. "Measuring Agglomeration Economies: The Case of the Ethiopian Cut Flower Industry," Discussion Papers 2013-04, Graduate School of Economics, Hitotsubashi University.
  15. Andrea Gauselmann & Philipp Marek, 2011. "Regional Determinants of MNE's Location Choice in Transition Economies," WIFO Working Papers 412, WIFO.

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