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Location choice of German multinationals in the Czech Republic. The importance of agglomeration economies

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  • Veronika Hecht

Abstract

This paper analyses the location choice of German investors in the Czech Republic based on a unique dataset covering all Czech companies with a German equity holder in 2010. The identification of the regional determinants of foreign direct investment (FDI) location is an important regional policy issue as FDI is supposed to improve the labour market conditions of the host region. Using a nested logit approach the impact of agglomeration economies, labour market conditions and distance on the location choice decision is investigated. The main result of the paper is that apart from a low distance to the location of the parent company the attractiveness of a Czech district for German investors is mainly driven by agglomeration economies. Besides localisation economies the agglomeration of German companies in a region plays a decisive role. The importance of labour market characteristics differs between investment sectors, sizes and periods.

Suggested Citation

  • Veronika Hecht, 2015. "Location choice of German multinationals in the Czech Republic. The importance of agglomeration economies," FIW Working Paper series 159, FIW.
    • Handle: RePEc:wsr:wpaper:y:2015:i:159
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    2. Johann Fuchs & Enzo Weber, 2017. "Long-term unemployment and labour force participation: a decomposition of unemployment to test for the discouragement and added worker hypotheses," Applied Economics, Taylor & Francis Journals, vol. 49(60), pages 5971-5982, December.
    3. Andrea Éltető & Katalin Antaloczy, 2017. "FDI promotion of the Visegrád countries in the era of global value chains," IWE Working Papers 229, Institute for World Economics - Centre for Economic and Regional Studies.
    4. Eckman, Stephanie & Kreuter, Frauke, 2015. "Misreporting to looping questions in surveys : recall, motivation and burden," IAB-Discussion Paper 201529, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
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    7. Weigand Roland & Wanger Susanne & Zapf Ines, 2018. "Factor Structural Time Series Models for Official Statistics with an Application to Hours Worked in Germany," Journal of Official Statistics, Sciendo, vol. 34(1), pages 265-301, March.
    8. Zapf, Ines, 2015. "Who profits from working-time accounts? : empirical evidence on the determinants of working-time accounts on the employers' and employees' side," IAB-Discussion Paper 201523, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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    More about this item

    Keywords

    Location choice; FDI; Multinational enterprises; Germany; Czech Republic; Agglomeration Economies;
    All these keywords.

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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