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Agglomeration Economies and the Location of Foreign Direct Investment: Empirical Evidence from Romania

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  • Christian Hilber
  • Ioan Voicu

Abstract

Hilber C. A. L. and Voicu I. Agglomeration economies and the location of foreign direct investment: empirical evidence from Romania, Regional Studies. The large inflow of foreign direct investment into Romania, after the revolution in 1989, is exploited to study the determinants of foreign direct investment location in transition economies. Using a conditional logit set-up and choice-specific fixed-effects, it is found that external economies from service agglomeration are the main determinant of foreign direct investment location. An increase in service employment density by 10.0% makes the average Romanian county 11.9% more likely to attract a foreign investor. Industry-specific foreign and domestic agglomeration economies and labour conflicts also impact foreign direct investment location. A comparison with findings of other studies suggests that service agglomeration economies may be geographically quite localized. [image omitted] Hilber C. A. L. et Voicu I. Les economies d'agglomeration et la localisation de l'Investissement direct etranger: des preuves empiriques provenant de la Roumanie, Regional Studies. Cet article approfondit le flux important d'Ide a destination de la Roumanie, suite a la revolution de 1989, afin d'etudier les determinants de la localisation de l'Ide dans les economies de transition. A partir d'un modele du type logit conditionnel et des effets specifiques aux choix, il s'avere que des economies externes dues a l'agglomeration des services sont les principaux determinants de la localisation de l'Ide. Une hausse de la densite de l'emploi tertiaire de 10 pourcent rend le comte roumanien moyen 11.9 pourcent plus susceptible d'attirer un investisseur etranger. Des economies d'agglomeration interieures et exterieures, specifiques a l'industrie, et les conflits du travail influent aussi sur la localisation de l'Ide. Une comparaison avec les resultats des etudes anterieures laisse supposer que les economies d'agglomeration du secteur tertiaire pourraient s'averer assez localisees du point de vue geographique. Economies d'agglomeration Investissement direct etranger Economies de transition Hilber C. A. L. und Voicu I. Agglomerationsvorteile und der Standort von auslandischen Direktinvestitionen: empirische Evidenz aus Rumanien, Regional Studies. Wir nutzen den starken Zustrom von auslandischen Direktinvestitionen nach Rumanien in der Zeit nach der Revolution von 1989 zur Analyse der Standorts-Determinanten von auslandischen Direktinvestitionen in Reformlandern. Mit Hilfe von konditionalen Logit-Modellen und von standortspezifischen fixen Effekten, zeigen wir auf, dass externe Effekte von dienstleistungsspezifischen Agglomerationsvorteilen die wichtigste Determinante der Standortwahl darstellen. Eine 10-prozentige Zunahme der Beschaftigungsdichte im Dienstleistungssektor in einem durchschnittlichen rumanischen Bezirk erhoht die Wahrscheinlichkeit, dass ein auslandischer Investor angezogen wird, um 11.9 Prozent. Auch branchenspezifische auslandische und einheimische Agglomerationsvorteile sowie Arbeitskonflikte beeinflussen den Standort von auslandischen Direktinvestitionen. Ein Vergleich mit den Ergebnissen anderer Studien lasst darauf schliessen, dass der Einfluss von dienstleistungsspezifischen Agglomerationsvorteilen auf die Standortwahl in geografischer Hinsicht recht lokalisiert ist. Agglomerationsvorteile Auslandische Direktinvestitionen Reformlander Hilber C. A. L. y Voicu I. Economias de aglomeracion y ubicacion de la Inversion Directa Extranjera: evidencia empirica de Rumania, Regional Studies. Analizamos la entrada de Inversion Directa Extranjera (IDE) en Rumania tras la revolucion de 1989 con la finalidad de estudiar los determinantes de la ubicacion de IDE en las economias de transicion. Con ayuda de una estructura condicional de un modelo logit y efectos fijos especificos de opcion, observamos que las economias externas de una aglomeracion de servicios son el principal factor para determinar la ubicacion de IDE. Un aumento de un 10 por ciento en la densidad del empleo de servicios incrementa en un 11,9 por ciento la probabilidad de atraer un inversor extranjero en un condado medio rumano. Las economias de aglomeracion especificas para la industria tanto nacionales como extranjeras y los conflictos laborales tambien influyen en la ubicacion de la IDE. En comparacion con los resultados de otros estudios se observa que las economias de aglomeracion de servicios pueden estar geograficamente bien localizadas. Economias de aglomeracion Inversion directa extranjera Economias de transicion

Suggested Citation

  • Christian Hilber & Ioan Voicu, 2010. "Agglomeration Economies and the Location of Foreign Direct Investment: Empirical Evidence from Romania," Regional Studies, Taylor & Francis Journals, vol. 44(3), pages 355-371.
  • Handle: RePEc:taf:regstd:v:44:y:2010:i:3:p:355-371
    DOI: 10.1080/00343400902783230
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    Keywords

    Agglomeration economies; Foreign direct investment; Transition economies;

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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