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How to Catch Foreign Fish? FDI and Privatization in EU Accession Countries

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  • Bruno Merlevede

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  • Koen Schoors

Abstract

We examine the determinants of FDI stocks of ‘old’ EU-members in ten accession countries. Our partial adjustment framework results in a dynamic panel data analysis. In addition to the traditional variables, such as market potential and unit labour costs, we find institutional development to be a robust determinant of equilibrium FDI stocks. The adjustment towards equilibrium is rapid. The relationship between FDI and the privatization process is complex. Non-direct privatization schemes negatively affect the speed of adjustment, whereas direct privatization strategies positively affect the equilibrium itself. Privatization history increases equilibrium FDI stocks, independently of the method applied.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp785.

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Length: pages
Date of creation: 01 Aug 2005
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Handle: RePEc:wdi:papers:2005-785

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Keywords: foreign direct investment; privatisation; partial adjustment;

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