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Determinants of bilateral foreing direct investment flows in the OECD, with a closer look at the former coummunist countries

The main purpose of this paper is to study the determinants of bilateral foreign direct investment (hereafter FDI) flows in OECD countries. Special emphasis is placed on the new Central and Eastern European members (Hungary, the Czech Republic and Poland) in order to assess whether they differ from those of the OECD on the whole. Our theoretical framework is based on the OLI paradigm (ownership, location, internalization) developed in Dunning (1974, 1980 and 1993). The panel data estimation takes into account the ideas suggested in Zhang and Markusen (1997). According to our findings the variables that can best explain the bilateral FDI flows within the OECD are: on the one hand, the technological superiority of the investor vis-à-vis the host and, on the other, the relative abundance of physical capital, the endowments of human capital, transport infrastructure, and the size of the host countries, which clearly act as a factor of attraction for FDI.

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Paper provided by European Economy Group in its series European Economy Group Working Papers with number 2.

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Length: 23 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:eeg:euroeg:2
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  1. Kenneth A. Froot, 1993. "Foreign Direct Investment," NBER Books, National Bureau of Economic Research, Inc, number froo93-1, July.
  2. Robert J. Barro & Jong-Wha Lee, 1993. "International Comparisons of Educational Attainment," NBER Working Papers 4349, National Bureau of Economic Research, Inc.
  3. J. A. Hausman & W. E. Taylor, 1980. "Panel Data and Unobservable Individual Effects," Working papers 255, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
  5. John H Dunning, 1980. "Towards an Eclectic Theory of International Production: Some Empirical Tests," Journal of International Business Studies, Palgrave Macmillan, vol. 11(1), pages 9-31, March.
  6. Martín, Carmela & Velazquez, Francisco J, 1997. "The Determining Factors of Foreign Direct Investment in Spain and the rest of the OECD: Lessons for CEECs," CEPR Discussion Papers 1637, C.E.P.R. Discussion Papers.
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