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Why Does FDI Go Where it Goes? New Evidence from the Transitional Economies

  • Campos, Nauro F
  • Kinoshita, Yuko

This Paper examines the importance of agglomeration economies and institutions vis-à-vis initial conditions and factor endowments in explaining the locational choice of foreign investors. Using a unique panel data set for 25 transition economies between 1990-98, we find that the main determinants are institutions, agglomeration and trade openness. We find important differences between the Eastern European and Baltic countries, on the one hand, and the former Soviet Union countries on the other: in the latter group, natural resources and infrastructure matter, while agglomeration matters only for the former group.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3984.

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Date of creation: Jul 2003
Date of revision:
Handle: RePEc:cpr:ceprdp:3984
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  1. Lucas, Robert E. B., 1993. "On the determinants of direct foreign investment: Evidence from East and Southeast Asia," World Development, Elsevier, vol. 21(3), pages 391-406, March.
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