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FDI inflows to the Transition Economies in Eastern Europe: Magnitude and Determinants

  • Johnson, Andreas

    ()

    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

This paper shows that there are large differences in the volume of FDI that individual European transition economies have attracted and tries to find determinants that can explain this distribution of FDI, using panel data. This paper makes a distinction between ‘traditional’ determinants based on the motive for FDI and ‘transition-specific’ determinants. The empirical analysis contributes to earlier research by separating the transition economies into two groups, CEE and CIS countries. The CEE group consists of countries with a much higher GDP per capita than the CIS group, and this is reflected in the observation that the FDI flows to the CEE are primarily driven by a market-seeking motive while resource-seeking investment can explain the distribution of FDI among the CIS economies. This paper also concludes that transition performance and the choice of primary privatisation method are important in explaining FDI inflows to the transition economies. The analysis only finds weak evidence for efficiency-seeking FDI into the region.

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Paper provided by Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies in its series Working Paper Series in Economics and Institutions of Innovation with number 59.

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Length: 65 pages
Date of creation: 29 Mar 2006
Date of revision:
Handle: RePEc:hhs:cesisp:0059
Contact details of provider: Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Phone: +46 8 790 95 63
Web page: http://www.infra.kth.se/cesis/

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