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A Nested logit approach to modelling the location of foreign direct investment in the Central and Eastern European Countries


  • Rasciute, Simona
  • Pentecost, Eric J.


This paper applies the Nested logit model to a three-level dataset in order to examine the factors explaining foreign investment location decisions into 13 Central and Eastern European Countries (CEECs) over an eleven-year period between 1997 and 2007. The three-level dataset allows firm, industry and country factors to simultaneously determine the firm-level investment location decisions. The Nested logit model partially relaxes the assumption of the independence from irrelevant alternatives and tests if national boundaries affect the choice of investment location of multinational enterprises in the CEECs. In addition, the Heteroskedastic Extreme Value model is used to help identify an appropriate nesting structure. Empirical results show that the responsiveness of the firms' decision regarding where to locate capital in the CEECs to country-level variables differs both across sectors and across firms of different sizes and profitability.

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  • Rasciute, Simona & Pentecost, Eric J., 2010. "A Nested logit approach to modelling the location of foreign direct investment in the Central and Eastern European Countries," Economic Modelling, Elsevier, vol. 27(1), pages 32-39, January.
  • Handle: RePEc:eee:ecmode:v:27:y:2010:i:1:p:32-39

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    References listed on IDEAS

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    Cited by:

    1. Valerija Botrić, 2013. "Determinants of Intra-industry Trade between Western Balkans and EU-15: Evidence from Bilateral Data," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 6(2), pages 7-23, September.
    2. Sánchez Navarro, Dennis, 2013. "Análisis de elasticidades en el mercado automotor colombiano (2009 - 2011) mediante un modelo logit anidado
      [Analysis Of Elasticity In Colombian Automotive Market (2009 - 2011) Through A Nested Log
      ," MPRA Paper 46043, University Library of Munich, Germany.
    3. Bartolj, Tjaša & Polanec, Sašo, 2012. "College major choice and ability: Why is general ability not enough?," Economics of Education Review, Elsevier, vol. 31(6), pages 996-1016.
    4. Mariem Brahim & Sébastien Dupuch, 2016. "Foreign direct investments in Europe: are the East-West differences still so noticeable?," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 13(1), pages 37-61, June.


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