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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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File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/MNLpaper.pdf
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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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  1. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
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  17. repec:cup:cbooks:9780521788304 is not listed on IDEAS
  18. Disdier, Anne-Celia & Mayer, Thierry, 2004. "How different is Eastern Europe? Structure and determinants of location choices by French firms in Eastern and Western Europe," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 280-296, June.
  19. Salvador Barrios & Sophia Dimelis & Helen Louri & Eric Strobl, 2004. "Efficiency spillovers from foreign direct investment in the EU periphery: A comparative study of Greece, Ireland, and Spain," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 140(4), pages 688-705, December.
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  23. Culem, Claudy G., 1988. "The locational determinants of direct investments among industrialized countries," European Economic Review, Elsevier, vol. 32(4), pages 885-904, April.
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