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Spatial complementarity of FDI: example of transition countries

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  • Oleksandr Shepotylo

    () (Kyiv School of Economics, Kyiv Economics Institute)

Abstract

This paper investigates spatial determinants of FDI location. In particular, FDI in neighboring countries and foreign market potential are two variables it focuses on. The sample includes a panel of 27 transition countries in 1993-2007. The spatial links are found positive and economically large. Omitting spatial FDI leads to a serious misspecication of the model and biases estimation of the coecient of the foreign market potential variable, which is found to be a non-robust determinant of FDI location. As the analysis of sub-samples of the data indicates, the FDI complementarity is stronger for the CIS countries and for earlier period. The spatial complenmentarity is stronger for disaggregated data such as bilateral FDI flows and industry level data. I nd substantial heterogeneity of spatial FDI spillovers across indus- tries. Spillovers are large and positive for services sectors and non-sighicant or even negative for manufacturing sectors.

Suggested Citation

  • Oleksandr Shepotylo, 2010. "Spatial complementarity of FDI: example of transition countries," Discussion Papers 29, Kyiv School of Economics.
  • Handle: RePEc:kse:dpaper:29
    Note: Submitted to European Economic Review
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    File URL: http://repec.kse.org.ua/pdf/KSE_dp29.pdf
    File Function: June 2010
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    References listed on IDEAS

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    Cited by:

    1. Timo Mitze, 2014. "Measuring Regional Spillovers in Long- and Short-Run Models of Total Factor Productivity, Trade, and FDI," International Regional Science Review, , vol. 37(3), pages 365-388, July.

    More about this item

    Keywords

    foreign direct investments; spatial econometrics; transition;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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