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Economic integration, border costs and FDI location: Evidence from the fifth European Union enlargement

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  • Jones, Jonathan
  • Serwicka, Ilona
  • Wren, Colin

Abstract

Little is known about the effect of border costs on FDI location. This paper explores this for the fifth European Union (EU) enlargement that integrated the ten Central and Eastern European countries (CEECs). It regresses count data for 35,105 FDI projects locating in 25 European countries over the period 1997–2010. Four EU accession events are examined for the more- and less-liberalized CEECs. It finds that the lower border costs doubled FDI in the CEECs at EU membership, of which 60% is diverted from the ‘old’ Europe. This membership effect is three-times greater for the more-liberalized countries, for which earlier accession events are unimportant.

Suggested Citation

  • Jones, Jonathan & Serwicka, Ilona & Wren, Colin, 2018. "Economic integration, border costs and FDI location: Evidence from the fifth European Union enlargement," International Review of Economics & Finance, Elsevier, vol. 54(C), pages 193-205.
  • Handle: RePEc:eee:reveco:v:54:y:2018:i:c:p:193-205
    DOI: 10.1016/j.iref.2017.08.007
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    References listed on IDEAS

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    More about this item

    Keywords

    FDI location; Border costs; Economic integration; European enlargement; Central and Eastern European Countries;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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