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The CEEC as FDI Attractors: A Menace to the EU Periphery?

  • AURORA GALEGO
  • CARLOS VIEIRA
  • ISABEL VIEIRA

The change of economic, social, and political orientation in Central and Eastern European countries (CEEC), together with the accession of a first group into the European Union in 2004, has raised a number of challenging questions. One object of interest has been the implications of Eastern openness in terms of international capital reallocation. This paper concentrates on the issue of foreign direct investment (FDI), a major channel of economic integration. In fact, in the particular case of these countries, a dramatic change in the pattern of FDI inflows took place in recent years. A number of studies have surveyed the determinants of FDI to this region, but the issue still remains relatively unexplored from the empirical point of view. Using a random effects panel data model in the analysis, we try to empirically uncover the main determinants of FDI and to examine the probability of FDI diversion from the EU periphery to these transition economies. This issue is especially interesting for the EU periphery in general, and for cheap labor suppliers such as Portugal in particular, because there are reasons to believe that some diversion of funds from the South to the East may be taking place.

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Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

Volume (Year): 40 (2004)
Issue (Month): 5 (September)
Pages: 74-91

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Handle: RePEc:mes:emfitr:v:40:y:2004:i:5:p:74-91
Contact details of provider: Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

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  1. Piazolo, Daniel & Kokta, Robert M. & Buch, Claudia M., 2001. "Does the East Get What Would Otherwise Flow to the South? FDI Diversion in Europe," Kiel Working Papers 1061, Kiel Institute for the World Economy (IfW).
  2. Peter Egger & Michael Pfaffermayr, 2003. "The proper panel econometric specification of the gravity equation: A three-way model with bilateral interaction effects," Empirical Economics, Springer, vol. 28(3), pages 571-580, July.
  3. Joel I. Deichmann & Abdolreza Eshghi & Dominique M. Haughton & Selin Ayek & Nicholas C. Teebagy, 2003. "Foreign Direct Investment in the Eurasian Transition States," Eastern European Economics, M.E. Sharpe, Inc., vol. 41(1), pages 5-34, January.
  4. repec:sae:niesru:v:156:y::i:1:p:104-114 is not listed on IDEAS
  5. Joel I. Deichmann & Abdolreza Eshghi & Dominique M. Haughton & Selin Ayek & Nicholas C. Teebagy, 2003. "Foreign Direct Investment in the Eurasian Transition States," Eastern European Economics, Taylor & Francis Journals, vol. 41(1), pages 5-34, January.
  6. Melanie Lansbury & Nigel Pain & Katerina Smidkova, 2004. "Foreign Direct Investment in Central Europe Since 1990: An Econometric Study," Macroeconomics 0404002, EconWPA.
  7. Hans-Peter Lankes & A. J. Venables, 1996. "Foreign direct investment in economic transition: the changing pattern of investments," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(2), pages 331-347, October.
  8. Alan A. Bevan & Saul Estrin, 2000. "The Determinants of Foreign Direct Investment in Transition Economies," William Davidson Institute Working Papers Series 342, William Davidson Institute at the University of Michigan.
  9. Henrik Braconier & Karolina Ekholm, 2002. "Foreign Direct Investment in Central and Eastern Europe: Employment Effects in the EU," Development Working Papers 161, Centro Studi Luca d'Agliano, University of Milano.
  10. Bevan, Alan & Estrin, Saul, 2000. "The Determinants of Foreign Direct Investment in Transition Economies," CEPR Discussion Papers 2638, C.E.P.R. Discussion Papers.
  11. de Melo, Martha & Denizer, Cevdet & Gelb, Alan, 1996. "From plan to market : patterns of transition," Policy Research Working Paper Series 1564, The World Bank.
  12. Laura Resmini, 1999. "The Determinants of Foreign Direct Investment into the CEECs: New Evidence from Sectoral Patterns," LICOS Discussion Papers 8399, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  13. Brenton, Paul & Di Mauro, Francesca, 1999. "The Potential Magnitude and Impact of FDI flows to CEECs," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 14, pages 59-74.
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