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Why Does Fdi Go Where it Goes? New Evidence From the Transition Economies

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  • Yuko Kinoshita
  • Nauro F. Campos

Abstract

This paper examines the importance of agglomeration economies and institutions vis-a-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 and 1998, 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 CIS countries on the other: in the latter group, natural resources and infrastructure matter, while agglomeration matters only for the former group.

Suggested Citation

  • Yuko Kinoshita & Nauro F. Campos, 2003. "Why Does Fdi Go Where it Goes? New Evidence From the Transition Economies," IMF Working Papers 2003/228, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2003/228
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    More about this item

    Keywords

    WP; CIS country; FDI inflow; country FDI flow; FDI stock; FDI motive; natural resource; foreign direct investment; transition economies; FDI flow; Natural resources; Labor costs; Estimation techniques; Stocks; Eastern Europe; Asia and Pacific;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects

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