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

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Author Info
Bruno Merlevede ()
Koen Schoors

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

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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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Find related papers by JEL classification:
F20 - International Economics - - International Factor Movements and International Business - - - General
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Linkages

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  19. Igor Filatotchev & Mike Wright & Michael Bleaney, 1999. "Privatization, insider control and managerial entrenchment in Russia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 481-504, July. [Downloadable!] (restricted)
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