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Does the East Get What Would Otherwise Flow to the South? FDI Diversion in Europe

  • Claudia M. Buch
  • Robert M. Kokta
  • Daniel Piazolo

This paper examines the FDI flows towards two regions in the periphery of Europe: the Central and Eastern European countries (CEECs) and the countries of Southern Europe. We investigate whether evidence exists for FDI diversion from Southern Europe to the CEECs. A cursory observation of recent FDI trends might give rise to such claims of diversion. On the basis of gravity model equations, this paper compares the expected and actual FDI figures. The findings lead us to conclude that there is no evidence of FDI diversion between these two regions.

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File URL: https://www.ifw-members.ifw-kiel.de/publications/does-the-east-get-what-would-otherwise-flow-to-the-south-fdi-diversion-in-europe/kap1061.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1061.

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Length: 43 pages
Date of creation: Jul 2001
Date of revision:
Handle: RePEc:kie:kieliw:1061
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  1. Laura Resmini, 2000. "The Determinants of Foreign Direct Investment in the CEECs: New evidence from sectoral patterns," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(3), pages 665-689, November.
  2. Deardoff, A.V., 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," Working Papers 382, Research Seminar in International Economics, University of Michigan.
  3. Brenton, Paul & DiMauro, Francesca & Lücke, Matthias, 1998. "Economic integration and FDI: an empirical analysis of foreign investment in the EU and in Central and Eastern Europe," Kiel Working Papers 890, Kiel Institute for the World Economy.
  4. Blomström, Magnus & Kokko, Ari, 1997. "Regional Integration and Foreign Direct Investment," SSE/EFI Working Paper Series in Economics and Finance 172, Stockholm School of Economics.
  5. Buch, Claudia M. & Piazolo, Daniel, 2001. "Capital and trade flows in Europe and the impact of enlargement," Economic Systems, Elsevier, vol. 25(3), pages 183-214, September.
  6. S. Lael Brainard, 1993. "A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration," NBER Working Papers 4269, National Bureau of Economic Research, Inc.
  7. Deardorff, A.V., 1995. "Determinants of Bilateral Trade : Does Gravity Work in a Neoclassical World?," Papers 95-05, Michigan - Center for Research on Economic & Social Theory.
  8. Jö Kleinert, 2001. "The Time Pattern of the Internationalization of Production," German Economic Review, Verein für Socialpolitik, vol. 2(1), pages 79-98, 02.
  9. Haaland, Jan I. & Wooton, Ian, 1991. "Market Integration, Competition and Welfare," CEPR Discussion Papers 574, C.E.P.R. Discussion Papers.
  10. Richard E. Baldwin & Rikard Forslid & Jan Haaland, 1995. "Investment Creation and Investment Diversion: Simulation Analysis of theSingle Market Programme," NBER Working Papers 5364, National Bureau of Economic Research, Inc.
  11. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June.
  12. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  13. Blomstrom, Magnus & Kokko, Ari, 1997. "Regional integration and foreign direct investment : a conceptual framework and three cases," Policy Research Working Paper Series 1750, The World Bank.
  14. Baldwin, Richard E. & Venables, Anthony J., 1995. "Regional economic integration," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644 Elsevier.
  15. Richard E. Baldwin & Joseph F. Francois & Richard Portes, 1997. "The costs and benefits of eastern enlargement: the impact on the EU and central Europe," Economic Policy, CEPR;CES;MSH, vol. 12(24), pages 125-176, 04.
  16. 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.
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