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Spatial complementarity of FDI: the example of transition countries

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  • Oleksandr Shepotylo

Abstract

This article investigates spatial determinants of FDI location. In particular, it focuses on FDI in neighbouring countries and foreign market potential for a panel of 25 transition countries in 1993--2010. The spatial FDI spillovers are found to be positive and economically large. Moreover, omitting spatial FDI leads to a serious misspecification of the model explaining FDI location and biases estimation of the coefficient of the foreign market potential variable, which is found to be a non-robust determinant of FDI location. The spatial complementarity is stronger for disaggregated data such as bilateral FDI and sector level FDI. There is substantial heterogeneity of spatial FDI spillovers across sectors. Spillovers are large and positive for services sectors and non-significant or even negative for manufacturing sectors.

Suggested Citation

  • Oleksandr Shepotylo, 2012. "Spatial complementarity of FDI: the example of transition countries," Post-Communist Economies, Taylor & Francis Journals, vol. 24(3), pages 327-349, October.
  • Handle: RePEc:taf:pocoec:v:24:y:2012:i:3:p:327-349
    DOI: 10.1080/14631377.2012.705468
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    File URL: http://hdl.handle.net/10.1080/14631377.2012.705468
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    References listed on IDEAS

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    1. Yuko Kinoshita & Nauro F. Campos, 2003. "Why Does Fdi Go Where it Goes? New Evidence From the Transition Economies," IMF Working Papers 03/228, International Monetary Fund.
    2. Cletus C. Coughlin & Eran Segev, 2000. "Foreign Direct Investment in China: A Spatial Econometric Study," The World Economy, Wiley Blackwell, vol. 23(1), pages 1-23, January.
    3. Paul Krugman, 1992. "A Dynamic Spatial Model," NBER Working Papers 4219, National Bureau of Economic Research, Inc.
    4. Harald Badinger & Peter Egger, 2009. "Estimation of Higher-Order Spatial Autoregressive Panel Data Error Component Models," CESifo Working Paper Series 2556, CESifo Group Munich.
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    Cited by:

    1. Joshua C. Hall & Serkan Karadas & Minh Tam T. Schlosky, 2016. "Spatial Spillover Effects of Debt Relief from the Heavily Indebted Poor Countries (HIPC) Initiative," Working Papers 16-23, Department of Economics, West Virginia University.

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