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An Empirical Investigation of the Determinants of the Location of Foreign Direct Investment in the Central and Eastern European Countries Using Multilevel Data

  • Simona Rasciute


    (Dept of Economics, Loughborough University)

  • Eric J. Pentecost


    (Dept of Economics, Loughborough University)

  • Helena I. Marques


    (Dept of Economics, Loughborough University)

This paper employs a novel multi-level data set and a multinomial logit model - to examine the factors explaining 1,223 foreign investment location decisions by firms in the EU(15), Japan, Norway, Russia, Switzerland and the US in 12 Central and Eastern European countries (CEECs). The highly significant empirical results, based on a general underlying model of imperfect competition, show that the responsiveness of foreign direct investment in the CEECs to country-level variables differs significantly both across sectors and across firms of different sizes and profitability. In particular, in addition to the traditional importance of market size and distance, firm size and the effective corporate tax rate are also important for the location of investment.

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Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2007_22.

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Date of creation: Sep 2007
Date of revision: Sep 2007
Handle: RePEc:lbo:lbowps:2007_22
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  24. Kimberly A. Clausing & Cosmina L. Dorobantu, 2005. "Re-entering Europe: Does European Union candidacy boost foreign direct investment?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 77-103, 01.
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